A new report reveals how stock buybacks have inflated CEO paychecks and widened pay gaps at the 100 largest low-wage corporations.
President Biden has flexed his executive powers in numerous ways to help working families. For instance, he’s lifted the wage floor for federal contract workers to $15 per hour. And he’s ordered large construction firms involved in public infrastructure projects to negotiate collective agreements with their workers.
But the administration could do much more to reduce disparities and build worker power within big U.S. corporations — without having to wait for Congressional action.
In a recent letter to Biden, labor unions and other economic justice groups expand on three ways the president could make changes to government contracting policies to help workers and give taxpayers a bigger bang for their buck.
At the top of the list: incentives to narrow gaps between CEO and worker pay. How big are these pay gaps? I recently pulled the data for 74 low-wage corporations that are major contractors for Uncle Sam. The average ratio between CEO and median worker pay at these firms hit a staggering 599 to 1 in 2021.
While these companies’ average CEO pay soared to $13 million last year, their average median pay was less than $27,000. In 2021, these firms spent a combined $4.6 billion on stock buybacks that will further inflate the value of their executives’ stock-based pay.
At one of these low-wage companies, TE Connectivity, CEO Terrence Curtin has reeled in billions in taxpayer-funded contracts in recent years while shipping thousands of U.S. jobs overseas. The company runs 16 electronics factories in China. Last year, Curtin enjoyed a 39 percent pay increase to $14.7 million. The company’s median worker pay rose only 0.2 percent to just $24,975.
Reams of research show that such extreme disparities are bad for business. But you don’t have to have a PhD to know that when workers feel they’re getting the shaft, they’re unlikely to give their all to their job. Treasury Secretary Janet Yellen acknowledged as much during her academic career, writing in one paper that the notion that pay disparity undermines enterprise effectiveness “conforms to common sense.”
The advocacy letter also urges the administration to use the power of the public purse to discourage wasteful corporate spending on stock buybacks. This previously illegal financial maneuver artificially inflates the value of CEO stock-based pay while doing nothing for workers.
Studies indicate that buybacks are also associated with reduced investment and innovation. One tragic case in point: Abbott, a federal contract recipient now notorious for contaminated baby formula, spent billions on stock buybacks while neglecting to make necessary upgrades to safety equipment.
President Biden is clearly not a fan of Corporate America’s rampant spending on buybacks, which is expected to hit a historic high of $1.1 trillion this year. He supports legislation to tax such expenditures, and his administration recently announced a plan to give priority in awarding new semiconductor manufacturing subsidies to firms that agree to forgo buybacks. That policy should be extended to all corporate recipients of federal contracts and subsidies.
Finally, the letter commends Biden’s executive order requiring big construction contractors to sign project labor agreements with their workers and urges him to extend that condition to all major contractors, along with a mandate to remain neutral in union organizing drives.
In recent years we’ve seen a rash of anti-union actions, including by major contractors like Amazon and Maximus, despite considerable evidence that unionization improves productivity. Empowering workers also tends to have a moderating effect on executive compensation.
These three demands complement other calls for pro-worker procurement reforms, such as proposals to expand family and paid sick leave for contract employees. The basic principle here: U.S. taxpayers should not have to fund corporate practices that undermine their own economic security.
President Biden has often said he wants to be the most pro-labor president in U.S. history. He shouldn’t hesitate to use all the tools in his executive action toolbox to make that goal a reality.