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Why wealthy business leaders are joining the call to end high CEO pay

It’s about economic justice, but it’s also about preserving enough consumers to keep business going.

Why wealthy business leaders are joining the call to end high CEO pay
[Source Image: ne2pi/iStock]

Recently, Abigail Disney, the granddaughter of Disney’s cofounder, has been making no secret of her disapproval of the way things are going at the company now. Specifically, at Fast Company‘s Impact Council, she called current CEO Bob Iger’s $65.6 million compensation “insane,” and criticized the fact that it totaled approximately 1,424 times more than the median salary of a Disney employee. She later backed up her sentiment to The Guardian, saying “”No one on this freaking planet is worth that kind of money.”

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Similarly, U.S. John Driscoll, CEO of the healthcare services company CareCentrix, wrote an op-ed recently detailing why, five years ago, he decided to freeze executive pay (including his own) at the company and redistribute the wages to people at the bottom of the company. At the time, they were earning the federal minimum wage of $7.25 per hour. By reining in skyrocketing compensation at the top of the corporate pyramid, CareCentrix raised the wage floor to $15 per hour, and saw its employee turnover rates, which were as high as 40%, slow down.

[Source Image: ne2pi/iStock]

The issue of disproportionate executive compensation is bound up in growing inequality in the U.S. In the last several decades, salaries for regular workers have held largely stagnant, while executive pay continues to climb. Not every CEO is at Iger’s level of out-earning his or her workers, but on average, executives make 312 times more than regular employees. Closing the pay gap between executives and workers has become a central tenet of the advocacy effort around workers’ rights and economic equity. Occupy Wall Street injected knowledge of the wealth gap between executives (the 1%) and everyone else (the 99%) into the collective imagination, and since then, there have been various efforts from labor unions and worker advocacy groups to call attention to the issue and the need for reform.

[Source Image: ne2pi/iStock]

It makes sense for this push to come from the people who are overtly and negatively impacted by the earnings gap in the U.S. But people who materially benefit from it, like Driscoll and Disney, are joining the call. They’re part of a group called Patriotic Millionaires, an association of people with high net worth who use their collective financial heft to push for progressive reforms, curbing executive pay among them. The organization has worked in collaboration with unions and political advocacy groups to support causes like higher taxes on the wealthy and living wages, in addition to advocating against runaway executive pay.

Disney says that disproportionate pay has “a corrosive effect on society.” Companies that overcompensate their CEOs uphold the idea that people who already have means can expect to get wealthier, and people who do not will continue to struggle. Driscoll, as a CEO, thinks that businesses can work internally to challenge this system. “When you actually are in a position to make decisions and you realize the members of your team are having a hard time living on the wages you provide, it’s a pretty simple thing to realize that you need to make changes and pay people a living wage,” Driscoll says of his move to cap executive compensation.

[Source Image: ne2pi/iStock]

But the rationale coming from Patriotic Millionaires is not always so altruistic. Morris Pearl, the chair of the organization and the former managing director at BlackRock, tells Fast Company that closing the gap between executive and worker compensation is crucial measure to keep business going. “My concern is that the middle is hollowing out and creating a system where there are some rich people and lots of poor people,” he says. “There aren’t going to be people who can afford to buy expensive ice creams and cell phones and shoes, and all the things that help people like me get rich.” Pearl is concerned about an eventual grinding to a halt of the economy. He does acknowledge that inequality in America is making life difficult for people at the lower-earning end, but says the focus on that is covered by activists who work with that cause. His take, he says, is designed to bring other wealthy people into the conversation by making it clear how inequality could ultimately backfire on them.

Pearl’s argument approaches the same end as equity advocates, but from a wildly different angle—and in a sense, illustrates how wide the empathy gap can be between haves and have-nots in the U.S. From the perspective of the working class, curbing executive pay is a crucial component of affording them a dignified lifestyle, one in which they can regain their footing in the economy and set themselves up for long-term stability. But Pearl’s framing shows that perhaps, people at the very top have lost sight of just how difficult it is for the people at the bottom to afford necessities like food and housing, let alone $10 ice creams. It could be a way to generate more momentum around the issue of closing the executive pay gap among those at the top of the economic spectrum, but achieving greater equity, not just keeping the rich rich, should be the aim.

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About the author

Eillie Anzilotti is an assistant editor for Fast Company's Ideas section, covering sustainability, social good, and alternative economies. Previously, she wrote for CityLab.

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