David Horsey :
Of the many statistics that expose America’s increasingly wide wealth gap, there is one that has stuck with me this week: The top 10% of wage earners in the U.S. receive half the income of all wage earners combined.
It is a function of simple math that people at the top of a wage scale will grab a bigger share of the money, but that share is not constant. According to Thomas Piketty of the Paris School of Economics, the highest 10% took in just a third of all income in 1960. In a New York Times interview, Piketty said a large proportion of the current rise to nearly 50% is due to the recent sharp increase in “supersalaries” being paid to senior executives.
Now, this may be simplistic math, but it strikes me that if supersalaries are taking a larger share, that means there is less left to pay workers and managers well down the corporate ladder. In other words, one cause of middle-class income stagnation might just be the greed at the top.
At many American corporations, the stark difference between the average worker’s wage and the CEO’s pay has become scandalous. In the U.S. in the 1960s, a top executive might receive compensation 20 times that of the people building the product or delivering the service. Now, the multiple is quite often 100 or 200 or more.
Much of the increase for CEOs comes from payment in company stock. Supposedly, this literally invests the boss in the success of the company. Unfortunately, it also has the effect of making workers look like expensive liabilities so that, in the service of improving the corporate bottom line, CEOs are inclined to ax some employees while loading down those who remain with more work for no extra pay. Perversely, this pushes productivity up even as wages go down.
Is it not time to start rewarding someone besides executives for a business’ success? Why should the guys in expensive suits on the top floor be the only ones to get a share of corporate success? It seems only fair that profit-sharing should extend deep into the ranks of those who actually do most of the work-especially if those people have spent years absorbing the downside of the business cycle through pay cuts and layoffs.
When people say that CEOs are overpaid, I agree. But where their argument falls apart is when they say that if CEOs were paid less, workers could be paid significantly more. That just isn’t true. If all Fortune 500 CEOs agreed to work for free and their total current compensation (cash, stock…
Americans used to have a better deal in the workplace. Much of it was fairness forced on companies by the power of labor unions. Collective bargaining, though, has all but disappeared from much of the economy and workers are now mostly left as individual cogs in the system with little to rely on but luck, their own gumption and the beneficence of their employer.
It would be lovely if big companies voluntarily recognized that better compensation for employees is better for the corporate enterprise and for the economy as a whole. But those who would make that enlightened choice are those richly rewarded folks in the executive suites and boardrooms who are rather content with the system as it is.
These are people who believe, in the words of Gordon Gekko, “greed is good.” What will it take to persuade them that broadly sharing the wealth is better?
(David Horsey is a management consultant)
