Walmart’s CEO makes 1,076 times what some of the company’s workers make in a year. The discount giant is not alone. Workers at 50 U.S.-based corporations would have to work at least 1,000 years to make what their CEOs did in just one year in 2018.
The biggest culprit is Tesla CEO Elon Musk, who earned more than $2.28 billion from Tesla in 2018, including his salary, stock options, stock appreciation, and other perks. With a median Tesla worker salary of $56,163, Musk takes home 40,668 times a median worker’s income per year.
Musk is an outlier, largely because the report assumes Musk will get a $2.2 billion stock option award he received 2018 that fully vests over 10 years if the company’s market capitalization increases to $100 billion and he hits other benchmarks (the current market cap is $41 billion). The second largest CEO to median worker pay gap takes place at Abercrombie & Fitch, where CEO Fran Horowitz-Bonadies makes 3,660 times the salary of the median worker. Gap, Mattel, and Align Technology (the makers of Invisalign) come next, all with salary disparities greater than 3,100 to one.
“It’s really a systemic problem,” says Sara Anderson, the lead author of the Institute for Policy Studies’ new report, Executive Excess 2019: Making Corporations Pay for Big Pay Gaps, which published these statistics today. Anderson has been the lead author of these reports for the past 26 years and directs the IPS Global Economy Project. Now, she says, policymakers are finally acting on an issue she sees as “one of the key drivers of inequality.” That’s true not just in the U.S. but also in other countries, where major U.S. corporations often employ people in order to get away with cheaper wages.
Beginning with their 2018 proxy statements, public companies in the U.S. have been required to disclose the difference between what their CEOs make in a year and what median workers earn, a change called for in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. In 2016, policymakers in Portland, Oregon, passed a tax on corporations with CEOs who make at least 100 times more than the median worker pay. “It’s exciting to see this taking off at state and local levels,” says Anderson, who was “quite involved” in passing Portland’s tax. The tax applies to companies doing business in Portland and penalizes them according to the size of their CEO-worker pay gaps. For instance, companies where CEOs make 250 times that of the median worker have to pay 25% in taxes.
The general income gap in the U.S. has been increasing over the past several decades. Between 1978 and 2017, the earnings of the top 0.1% of Americans went up by about 340%—but that’s still nothing compared to how much CEOs have been making. In that same time period, CEO pay grew at three times that rate, with the average CEO of a major corporation making 5.4 times as much as an average member of the top 0.1%. Unsurprisingly, the pay gap is broadly unpopular among voters. “I am from a rural, pretty red community in the Midwest, and for a long, long time, ordinary people have been totally outraged about the gap between CEO and worker pay across the political spectrum,” Anderson says.
Anderson was surprised by the “diversity” in the top 50 U.S. corporations with the widest pay gaps. While low-wage retailers, like Walmart, predictably made the list, there were also plenty of big tech firms and even auto parts businesses. “It shows the breadth of this problem,” she says. “We can’t just think that it’s a few bad apples like Walmart and McDonald’s.”
Walmart, with its 1,076:1 pay gap, has the 46th highest CEO to worker pay gap on the list. McDonald’s is number 16, with a gap of 2,124:1.
In March 2020, San Francisco will have a tax similar to Portland’s on the ballot, and bills have been introduced in at least six other state legislatures. Taxes and fees relating to CEO versus worker pay disparities have been proposed in Illinois, Minnesota, Massachusetts, Washington, Rhode Island, and Connecticut.
“It’s taken a while for policymakers to catch up on this,” says Anderson. “The disclosure rule is really a first step toward tougher policies to crack down on this issue . . . Now we can see how much specific companies are contributing to our country’s inequality problem and use that data to narrow these gaps.”
We’ve updated this article to provide more details on how the report calculated Musk’s compensation