Ed Smith, a Chicago Alderman, took a look at the salary for Walmart CEO Michael Duke. Duke earns $35 million dollars a year. By contrast, a Walmart employee starting out in a Chicago Walmart will earn $8.75 an hour, with a gross salary of $13,650.00 a year. According to ABC News, Alderman Smith decided to crunch these numbers. Calculating Michael Duke’s work week at 40 hours, Smith calculated the hourly wage of CEO Michael Duke. It came out to $16,826.92. In one hour, he earned more than one of his workers does in a year.
Walmart can at least point to the fact that their company is turning a profit. They have beaten the severe recession that has battered the rest of the country. There are CEOs with multimillion dollar salaries who have presided over corporate failure. What are some other corporate salaries? Executive Paywatch is a site run by the AFL CIO. It publicizes the high pay of many CEO’s. On that list, the highest paid CEO was Aubrey K McClendon, who earned over $100 million in 2008. On the low end of the top 100, James R. Young earned a little more than a paltry $15 million.
MSN reports that back in the 1960′s the ratio between CEO pay to that of an average worker was about 24 to 1. In 1978, this ratio had gone up to 35 to 1. In the 1990′s this disparity swelled to 100:1. At one point in 200o, this ratio was 300:1. Even with the current recession influencing pay scales, CEO pay is still well above the 100:1 ratio.
“There is no perfect methodology for calculating this ratio (or otherwise quantifying the precise increase in CEO pay). Still, even if the average CEO is paid only about 200 times as much as the average employee, rather than roughly 400 times, there is little doubt that the ratio in the United States remains far higher than in other industrialized nations. According to The Wall Street Journal, in 2006, the CEO to average worker pay ratio was 11 to 1 in Japan, 15 to 1 in France, 20 to 1 in Canada, 21 to 1 in South Africa, and 22 to 1 in Britain.“
What are some of the disadvantages to America’s corporate compensation? Failing CEO’s are often rewarded extravagantly. Under socialism, there is no tie between productivity and prosperity. CEO’s in America share that common feature with failed socialist economies. An additional problem is aloofness and alienation. The flip side of executives who feel they can’t fail is workers who feel they can’t succeed.
But the biggest problem created by squeezing workers is created when they cut back on spending to get by. When people feel they can replace their cars and computers, it creates work. When they eat out once a week instead of once a month, it creates jobs. Well paid workers sustain an economy. Obscenely paid CEO’s have no comparable impact.
Walmart’s CEO might be today’s dinner table talk. But the general problem of the ratio between CEO pay and that of workers affects our economic recovery. How will we address this problem? Shareholder meetings might be a good place to start. Consumers might also bring pressure to bear on businesses in the public eye. We take it for granted that a worker should earn his weekly pay. It’s about time we asked the same of our CEOs.