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from the because-when-they-mess-up-they-only-have-a-golden-parachute...wait-a-minute dept.
Why are CEOs of U.S. firms paid 320 times as much as their workers?:
Last August, Jamelle Brown, a technician at Research Medical Center in Kansas City, Missouri, contracted Covid-19 while on the job sanitizing and sterilizing rooms in the facility's emergency department. Luckily, his case wasn't severe, and after having quarantined, he was back at work.
Upon his return, Brown was named Employee of the Month in his unit and given a gift voucher for use in the hospital cafeteria. The amount: $6.
"That stung me to the bone," said Brown, who makes $13.77 an hour and has worked for almost four years at the hospital, owned by the corporate giant HCA Healthcare. "It made me sit back and say, 'This place doesn't care for me.'"
Research Medical's owner, HCA Healthcare Inc., is a profitable, publicly traded network of 185 hospitals and 121 freestanding surgery centers in 20 states and England. Even in the year of Covid-19, 2020, the company generated $51.5 billion in revenue and increased its pretax earnings by 3.6 percent. Its shares are up by 14 percent this year, versus 10 percent on the Standard & Poor's 500 index.
That performance helped boost the total compensation HCA's chief executive, Samuel N. Hazen, received last year to $30.4 million, a 13 percent rise from 2019, documents show. Although Hazen's salary was 5.8 percent lower in 2020, the total worth of his compensation package equaled 556 times the compensation received by the median employee at HCA — $54,651.
The figures highlight the growing CEO pay gap, a problem among many public companies according to some investors and workers and even a few CEOs. In 2019, for example, the average pay ratio among 350 large American companies was 320-to-1, according to research by the Economic Policy Institute, a left-leaning think tank in Washington, D.C. In 1989, the average was 61-to-1.
(Score: 2, Insightful) by Anonymous Coward on Monday April 12 2021, @11:30AM (7 children)
Probably because said CEOs and their board member buddies decide each other's pay, and get a summary approval at shareholders meetings. Not enough shareholder activism is the problem.
Almost as bad as members of parliament deciding their own pay.
(Score: 5, Interesting) by stretch611 on Monday April 12 2021, @12:01PM
As the parent AC said... The boards determine executive pay. Whats more is that in many cases, the CEO often is on the board for other companies and gives raises to CEOs who sit on his board in one huge circle jerk.
And CEOs never do anything wrong... If profits are up in a good economy, it is because of the CEO, not the economy. If profits are down in a down economy, its the economy's fault; not the CEO. And if a CEO is in the middle of a big f-up that ends up being so bad that the mainstream media reports... He will step down as CEO.... But of course retain his seats on the board in other companies. Only until he is forgotten and rises to become CEO of a different corporation.
And ofc, none of a companies actual workers have the experience to sit on a board, so their is no more hiring from within... That died 50 years ago. All board members must be hired from outside boards unless they happen to share the same last name of an existing board member. (but that is always a co-incidence.)
Now with 5 covid vaccine shots/boosters altering my DNA :P
(Score: 3, Insightful) by istartedi on Monday April 12 2021, @12:50PM (4 children)
I don't think shareholder activism can fix it. Even if you can get something placed on the ballot *and* convince lots of little fish to even pay attention to their proxy vote, often big fish hold the majority of the voting shares.
Even if the think the compensation is too high, they won't vote against it because a potential disruption in the C-suite is even more costly to shareholders, at least in the short run and that's very much the mentality.
Unfortunately, I think it has to be legislated. If they're all playing by the same rules, then nobody will jump ship because of a pay-cut, they'll all just bitch about it together and... donate the congresspeople. In fact, I'm pretty sure they're already doing that to prevent this from ever happening in the first place.
You'd need legislative integrity to make it happen. Nobody's holding their breath.
Appended to the end of comments you post. Max: 120 chars.
(Score: 2, Insightful) by khallow on Monday April 12 2021, @04:01PM (2 children)
In other words, a demonstration of the value of the CEO. OTOH, a large company that suddenly loses several hundred low level employees will not experience a similar disruption of their stock price.
(Score: 0) by Anonymous Coward on Monday April 12 2021, @06:44PM (1 child)
So then what does that tell you about the stock market?
(Score: 1) by khallow on Monday April 12 2021, @08:28PM
(Score: 0) by Anonymous Coward on Tuesday April 13 2021, @12:55AM
Hey, GP here.
When I wrote "shareholder activism", I didn't mean by you or me with our handful of shares. I meant by BlackRock or whichever significant shareholder has the direct voting power to make a difference.
But I agree with you that the likelihood of anything like this happening naturally without legislation is pretty low.
(Score: 2) by shortscreen on Monday April 12 2021, @08:39PM
You've correctly identified the people who have a say in the matter. But shareholders are just there to skim profits. It's why they bought the shares. They have little reason to object to the CEO doing the same thing.