Did America’s Greediest Corporation Just Become Greedier?

Walmart, the single biggest corporate contributor to inequality in the United States over the past half-century, is doubling down on greed. The giant retailer has just named the recently retired AT&T CEO Randall Stephenson to its 12-person board of directors.

Stephenson, over the course of his 38 years at AT&T, never quite became a national household name. But his career has almost perfectly personified the ethos inside Corporate America’s executive suites: grab as much as you can, as fast as you can, from your workers and the public at large.

In 2019, for instance, Stephenson pulled down $32 million in personal compensation. In that same year, AT&T eliminated 7.6 percent of its workforce, about 20,000 jobs.

An even more cynical chapter in Stephenson’s career came two years earlier, in 2017, when he helped lead the corporate cheerleading for Donald Trump’s whopping tax cut for America’s most fortunate. If the tax break Trump was proposing became law, Stephenson promised, AT&T would invest an extra $1 billion and create 7,000 new jobs paying between $70,000 and $80,000 a year.

That tax cut did become law and saved AT&T a whopping $3 billion in 2018. But the AT&T payroll, not counting employees gained through mergers, actually dropped. What did rise: AT&T executive pay.

This sordid AT&T story, new research from Grinnell College economist Eric Ohrn underscores, hardly rates as something out of the ordinary within modern Corporate America. Top execs at major U.S. corporations, his latest scholarship shows, have been systematically exploiting tax breaks to feather their own nests.

Ohrn focuses his just-released study on two specific federal corporate tax breaks, the “bonus depreciation” enacted in 2002 that let companies deduct more of what they pay for new assets they need to conduct their business and a tax policy adopted in 2004 that allowed firms to deduct a chunk of what they make from domestic manufacturing from their overall taxable income.

Both these moves, Ohrn found, ended up stuffing corporate executive wallets. For every single percentage point decrease in the cost of new investments that bonus depreciation delivered, executive pay jumped 4.4 percent. The second tax break Ohrn studied delivered a 3.2 percent increase in executive pay for every 1 percent decrease in corporate tax rates.

Overall, 15 to 19 percent of the benefits from the tax breaks Ohrn analyzed ended up in the pockets of the top five executives at the companies that claimed those breaks.

And what about the workers at those companies? Corporate tax breaks, Ohrn notes, appear to “increase executive pay by more than five times as much as the pay of the average worker.”

Ohrn’s new research, notes Center for Economic and Policy Research economist Dean Baker, essentially reinforces a core point corporate pay critics have been making for years: “CEOs and other top executives rip off the companies they work for.” Ohrn has offered up, adds Baker, “yet another piece of evidence” that executives are pocketing “money that they did nothing to earn.”

And all those dollars execs are doing nothing to earn are driving American income inequality ever wider. So what do we do? Some analysts are calling for changes in corporate governance.

The 2010 Dodd-Frank financial reform law gave shareholders the right, every three years, to cast an advisory vote on executive pay. Many analysts and activists want that “say on pay” extended. Dean Baker, for instance, is proposing that those who sit on corporate boards of directors lose their own pay whenever shareholders vote down a CEO pay package.

Other analysts and activists feel we can’t simply rely on shareholders to keep executive compensation at reasonable levels. They’re backing legislation introduced in the last Congress —the Tax Excessive CEO Pay Act — that would raise taxes on companies with outrageous gaps between CEO and worker pay.

These tax hikes, under this proposed legislation, would hit all companies that pay their top execs over 50 times what they pay their median — most typical — worker. The tax penalty would rise as the gap widens. Companies that pay their CEOs over 500 times median worker pay would face a five-percentage-point penalty.

Let’s put that 50-times threshold for the Tax Excessive CEO Pay Act’s tax penalty in some historic perspective. Back in the 1960s and into the 1970s, CEOs at big-time U.S. corporations averaged no more than 20 to 30 times median worker pay. The average gap in 2019, the latest year with full stats available: 320 times.

Raising taxes on corporations with wide ratios, as the Tax Excessive CEO Pay Act mandates, would be one powerful antidote to America’s ever-widening income inequality. But lawmakers could take other steps as well. They could, for instance, deny government contracts to companies with outrageously wide ratios. Or give companies with reasonable ratios preferential treatment in the government procurement process.

Two U.S. cities — Portland, Oregon, and San Francisco — have already adopted penalties on corporations with wide ratios, and a number of states have similar measures pending.

All these measures, unfortunately, have come too late to derail the windfalls that have come the way of the newest member of Walmart’s board of directors, the now-retired AT&T CEO Randall Stephenson. In 2019, AT&T compensated Stephenson at 325 times the pay of the typical AT&T worker.

But who knows, maybe the 325-to1 Stephenson will actually turn out to be a restraining influence at Walmart. In the 2020 fiscal year, Walmart’s CEO pocketed a sweet 1,188 times the pay of the typical Walmart worker.

Sam Pizzigati co-edits Inequality.org. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.