Posted: October 6, 2020
Chief Executive Officer salaries are under more and more scrutiny these days, especially in the midst of a global pandemic that threatens the economy of nearly every business worldwide. Some industries have proven to be more resilient or simply better poised to handle a pandemic of this nature. Amazon is one of the most cited examples of a company that has managed to profit and grow despite the difficult situation that most Americans face in the battle against COVID-19. But on the whole there seems to be a trend of CEO salaries seeing substantial cuts in order to see their respective companies through a difficult time. With widespread unemployment and most Americans seeing a sluggish return to normalcy and sustainable incomes, are CEOs really suffering to the same extent as the median worker? In the last 40 years CEO compensation rose 1,000% while average worker compensation rose around 12%. While these numbers vary depending on the source, the idea that CEO pay and average worker pay has grown further and further apart over the last few decades promotes a widening inequality gap in America. And that’s pretty well accepted no matter the metrics. Has the impact of COVID-19 done anything to impact the widening gap? With talk of minimized CEO salaries, has that gap diminished? As unemployment numbers surge, especially in heavy-hit industries like entertainment, dining, and travel, many CEOs are opting to take pay cuts to help weather the storm. Base CEO salaries are being reduced, but that does not represent the majority of CEO compensation. Incentive compensation often makes up a huge portion of executive salaries which causes base salary cuts to appear a little deceiving. A base salary reduction of 50% may only signify an overall compensation loss of under 10%. AFL-CIO Secretary-Treasurer Liz Shuler foresees the inequality gap between American CEOs and average workers becoming more extreme in the wake of COVID-19. Worker furloughs were met with base salary cuts for many CEOs, but stock awards, option awards, and other incentives and compensation types were largely untouched. While the base salary cuts are often appreciated by affected workers and in some instances even as extreme as 100% salary cuts in certain high-profile examples like Alaska Air or Delta, they may not be doing anything to hinder the inequality gap. Many estimates claim that CEO compensation is at least 275 times the average workers’ pay in America. COVID-19 has added to the situation by generating unemployment rates that are unprecedented in the last 70 years. Some cities reached 15% unemployment rates in the last few months, and it is worth mentioning that these numbers do not account for workers who experienced a reduction of hours or wage cuts. So, on the surface it looks like CEOs are making sincere sacrifices in order to help companies through these tough times while showing solidarity with affected workers. But it is worth considering that ever present inequality gaps may not be reduced as CEO compensation is only partially reliant on base salary. The aftermath of COVID-19 may see the inequality gap growing even further. To learn more about maximizing executive salary, visit our Contact Page, or contact us directly by email at email@example.com or by phone at 415-618-6060.