The pay gap between business leaders and workers at low-wage companies narrowed somewhat between 2022 and 2023, but is still enormous, according to a report released Thursday.
In addition, these executives invested far more in a strategy that boosts their already generous salaries than in their employees’ retirement benefits. In fact, nearly half of them invested more in the strategy – share buybacks – than in their own companies, the report said.
The Executive Excess 2024 report is the 30th report of its kind from the Institute for Policy Studies, a think tank that focuses on inequality, among other issues.
The report examinesIt identifies the 100 S&P 500 companies with the lowest median employee salaries and tracks changes from one year to the next.
One of the key findings of this year’s report is that the gap between CEO pay and that of middle-paid employees actually narrowed between 2022 and 2023. This may be because they were subject to a 1% excise tax through the Inflation Reduction Act of 2022.
However, the difference is still enormous: for example, the CEO received 603 times as much as the average employee, while the CEO received only 538 times as much. The slight narrowing of the pay gap was due to both a 9% increase in median worker pay to $34,522 in 2023 and a 4% decline in CEO pay to $14.7 million, the report said.
Such enormous differences between the salary of the top boss and that of the average worker are not just a question of fairness. The differences between the salaries of executives and employees contribute to income inequality in the United States, and this is linked to higher crime rates, higher consumer debt and worse health outcomesA separate report from last year said.
This year’s Executive Excess report again examined an important mechanism by which CEOs increase their salaries.
When they decide to use company earnings to buy back stock, they do themselves a favor because much of their compensation comes in the form of company stock. The value of that stock increases with demand, and buybacks increase demand.
This dynamic can create perverse incentives for executives to put their own interests ahead of those of their companies and their employees. And in many cases, the 100 lowest-wage countries spent more on share buybacks than on their companies.
In total, companies spent more than half a trillion dollars on share buybacks in the five years through December, while making investments of three-quarters of a trillion dollars in the same period, the report said.
Nevertheless, almost half of these companies (47 percent) spent more on share buybacks than they spent on investments.
And while company bosses spend large sums of money to make their own already comfortable retirement even more pleasant, they spend far less on their employees’ retirement benefits.
The largest discrepancy among the 20 largest low-wage employers was at Chipotle Mexican Grill. The company spent $2.1 billion on stock buybacks over five years while spending only $24 million on retirement benefits for its 114,000 employees, the report said. Put another way, Chipotle spent nearly 50 times as much on stock buybacks as it did on employee retirement benefits during that period.
Meanwhile, CEO Brian Niccol’s compensation in 2023 alone will be – 22.4 million US dollars — was almost equal to the pensions paid to all employees of the Company combined over the last five years.
Among the 20 largest low-wage employers, Cincinnati-based Kroger had one of the lowest ratios of stock buybacks to retirement savings. Yet the company spent nearly four times as much on stock buybacks as it did on employee retirement savings over the five-year period, the report said.
In addition to the 1% excise tax on stock buybacks introduced by the Inflation Reduction Act, other measures are being taken to curb this practice. Senators Sherrod Brown (D-Ohio) and Ron Wyden (D-Oregon) have drafted a bill that would quadruple that percentage.
In addition, the Biden administration has proposed preventing executives from selling their shares for a multi-year period following a buyback.“They thereby prevent CEOs from choosing the right time to buy back their shares in order to personally profit from a short-term price increase that they themselves have artificially brought about,” the report says.
