CEOs Boosted Salaries as Workers Struggled Amid Pandemic, Study Claims

A study conducted by the Institute for Policy Studies found that 51 of the 100 S&P 500 firms with the lowest median worker wages last year manipulated pay rules to inflate the salaries of CEOs while their frontline employees struggled.

CEO compensation in 2020 averaged $15.3 million, equating to a 29% boost over the previous year, according to the study. Common manipulations by businesses analyzed in the study include the boosting of executives’ pay by lowering performance bars to help them meet bonus targets, the awarding of special “retention” bonuses, and replacing performance-based pay with time-based awards.

“Over half of America’s largest low-wage employers, we found, bent the rules to boost CEO pay last year — even as essential workers took the biggest risks to keep the economy running,” the text of the study read. “This kind of greed left working families much more vulnerable even before the COVID-19 crisis, with nearly 40 percent of Americans unable to afford a $400 emergency. During the pandemic itself, it spelled catastrophe for ordinary families.”

The widest gap between CEO and worker pay during the pandemic came from auto parts maker Aptiv. The company’s board manipulated bonus metrics to increase CEO Kevin Clark’s salary to $31.3 million, a figure that equals 5,294 times the company’s $5,906 global median worker pay. 

Board members of Carnival Cruise Lines, a company that reported $10.2 billion in net losses last year, granted CEO Donald Arnold significant COVID-19 “retention and incentive” awards valued at more than $5 million. Despite the exceptionally tough year for employees of the cruise line, Arnold’s $13.3 million CEO compensation totaled 490 times as much as the company’s $27,151 median worker pay.

“Our nation’s growing pay divide has also driven gender and racial disparities,” the text of the study read. “Women and people of color make up a disproportionately large share of today’s low-wage workforce and a distressingly tiny share of corporate leadership. Black executives make up only 1% of CEOs at the 500 largest U.S. corporations, Asian executives only 2.4%, and Latinos just 3.4%. Women occupy a mere 6% of top corporate CEO suites.”

Low wage workers — particularly workers of color — suffered the highest job loss rates in 2020. This group also experienced the highest COVID-19 infection rates, due in part to the fact many continued to work frontline jobs throughout the pandemic despite inherent health risks.

Median worker pay decreased last year by 2% to an average of $28,187, the study reported. The average CEO-to-worker pay ratio at the 51 firms found to have boosted executive pay last year was 830 to one.

“The 100 S&P 500 corporations we analyzed all paid median compensation under $50,000 in 2020,” the text of the study read. “Some did offer frontline employees paid leave and small pay increases during the pandemic, usually around $2 per hour, but in nearly all cases this modest extra COVID support would be only temporary. By October 2020, a Brookings study reports, few employers were still offering hazard pay, despite rising infection rates. The real largesse flowed only to C-suites.”

CEO salary cuts during the pandemic amounted to an “empty gesture,” the study states, because executives’ salaries amount to only about 10% of their compensation. Over 500 publicly held companies in the United States announced cuts to their CEO base salary in 2020.

One common defense for high executive compensation is the contention that CEOs bear “exceptional risk” by receiving compensation in the form of variable pay tied to performance metrics or the value of the company’s share price. However, corporate compensation systems were easily modified during the pandemic to prevent executives from losing out on wages.

“The pay gap between U.S. CEOs and their workers has increased, on average, over 15-fold since the 1960s,” the study’s conclusion read. “No nation in the world has CEOs as lavishly compensated as the United States today. No nation in the developed world has workers as economically vulnerable as workers in the United States. The CEO pandemic pay plunder we have profiled here has flowed naturally from the continuing outrageousness of this debilitating state of corporate affairs. We don’t need to toss ‘bad apples.’ We need to plant a new tree.”