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Article Explains Why CEOs Make More

A recent article by Dave Johnson on explains why corporate CEOs make as much 300 times more than their employees. According to the article, the following factors result in exorbitant CEO pay and low wages for the average worker:

  1. Free Trade—“Free trade” deals, the article says, allow companies to take good wages and worker safety and environmental protections overseas. Companies move production to places where people don’t have rights and the environment is even less protected, and then bring the same product or service back to America to sell for high prices.
  2. Stock Ownership—CEOs are paid heavily in stock. The average value of stock awarded to CEOs surged 17 percent last year to $4.5 million, the largest increase ever recorded by the Associated Press.  The S&P 500 jumped 30 percent last year, compounding the size of CEO paydays. Most stock is owned by the wealthiest 1% with spillover to the next 9%. The “bottom” 60% of all Americans own only 2.5% of all corporate stock.
  3. “Friendly” Board Directors— Many boards are composed of current and former CEOs at other companies, the article says. And in some cases, board members are essentially hand-picked or at least vetted by a CEO. Most workers don’t have “friendly” bosses eager to pay more.
  4. Privatization—When a government turns a public service over to a private corporation, the government lays off people who are receiving decent salaries and benefits. The company then hires people at the lowest possible pay rate with no benefits. The former public employees then have to depend on government “safety net” services. Meanwhile, the new low-wage replacements can’t buy houses, shop as much, pay much in taxes, and are paid so little they also depend on safety-net services. The quality of the service declines, while the CEOs running the company make a killing and dodge taxes.
  5. High Unemployment—When trade deals let companies move jobs out of the country, it creates a “reserve army” of long-term unemployed people desperate to take any job at any wage. Companies know this and use it to tell people not ask for raises. Unemployment benefits used to help keep wages up by helping people get through what used to be short-term spans between jobs. Conservatives in Congress filibustered to block a vote on extending unemployment benefits to help people through our current unemployment emergency.
  6. Weak UnionsThe above listed factors helped weaken the power of ordinary Americans to organize ourselves and stand together against concentrated corporate power. Unions were weakened and their ability to ask for good pay, benefits, and better working conditions were weakened, too. Now, many individuals are on their own, up against the massive corporate wealth and power that is concentrated into fewer and fewer hands.
  7. Technology—When workers are replaced by a computer or a machine, a company can save the money it was paying them—and its stock goes up.
  8. Lack of Government Help—A recent study concludes that we are no longer a democracy, but instead are an oligarchy. Now, government is obstructed by a corporate-backed minority and prevented from doing things that would help the incomes of ordinary Americans. Unemployment is kept high to drive wages down. Tax rules are rigged to drive more and more money to a few at the top.

“These things didn’t just happen,” the article concludes. “They were done to us. High pay at the top and low pay for the rest of us isn’t inevitable. It is the result of rigging the rules so they work best for the wealthy.”

To read the full article, complete with citations and proposed solutions, go to

For more information about high-paid CEOs and the Low-Wage Economy, visit the AFL-CIO's Executive Paywatch site:


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