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Fat Cat Tuesday: A CEO Pay Milestone

CEOs on both sides of the Atlantic have already made more in 2016 than most of their workers will make for the entire year.

Blogging Our Great Divide
January 05, 2016

by Sarah Anderson

In New Orleans, they celebrate Fat Tuesday with raucous parades and bead-throwing. In the UK, they’re marking Fat Cat Tuesday with disturbing statistics about runaway CEO pay.

By late afternoon on January 5, the second working day of the year, Britain’s top bosses had earned more than the average UK worker would earn in the entire year, according to the High Pay Centre, an independent think tank.

But American bosses could kick off even earlier in the year and still make as much as an average U.S. worker would in all of 2016.

According to the AFL-CIO, CEOs of large U.S. corporations made $13.5 million on average in 2014, while average worker pay stood at $36,134. Using the High Pay Centre’s methodology, I calculated that the American bosses would have to work only 11 hours to make the average worker’s annual salary, compared to 22 hours for their British counterparts.

The High Pay Centre has echoed many of the arguments IPS and other CEO pay critics have been making for years about the dangers that extreme gaps in pay pose for our economy and democracy. As Centre Director Stefan Stern puts it, “Over-payment at the top is fueling distrust of business, at a time when business needs to demonstrate that it is part of the solution to harsh times and squeezed incomes.”

In 2014, the High Pay Centre issued a report calling for a maximum ratio between CEO and worker pay, pointing out that such a cap “would recognize the important principle that all workers should share in a company’s success.”

In the United States, we made important progress on this front in 2015 when the SEC voted in August to adopt new rules requiring public companies to disclose the pay ratio between their CEO and employees.

In the coming year, we look forward to working with allies here and in the UK and other countries to build on this momentum. That new disclosure rule, once it goes into effect in 2017, could be the foundation for reform with more teeth. For example, we could make companies with the widest pay gaps pay higher tax rates or give preferential treatment in government contracting to firms with more moderate divides.

These kinds of pay ratio policies would go a long way towards reining in excessive executive compensation and ensuring that ordinary workers are fairly rewarded for the value they add to their firms.

And then we would really have reason to celebrate on Fat Cat Tuesday.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies. For the last two decades, she has been the lead author of the annual IPS Executive Excess report.

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