Ethermac|UAW strike puts spotlight on pay gap between CEOs and workers

The EthermacUnited Auto Workers strike has entered Day 6 as union representatives and Detroit's Big Three remain at odds over wage increases.

UAW President Shawn Fain and other union leaders have argued that Ford, General Motors and Stellantis — parent company of Chrysler, Dodge, Jeep and Ram — can afford to pay workers more money because the companies have sharply boosted CEO pay in recent years. Those pay increases have helped create an unreasonably high pay gap between CEOs and average workers, the UAW says. 

"The reason we ask for 40% pay increases is because, in the last four years alone, the CEO pay went up 40%," Fain said on CBS News'"Face the Nation" Sunday. "They're already millionaires."

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A Ford representative told CBS MoneyWatch that the UAW's claims are misleading, noting that since 2019 CEO Jim Farley's total compensation has risen 21%, not 40%, while his annual salary over that period is down 6%.

Farley earned $21 million in total compensation last year, the Detroit News reported, which is 281 times more than typical workers at the company, according to Ford filings with the Securities and Exchange Commission. Stellantis CEO Carlos Tavares made $24.8 million in 2022, according to the Detroit Free Press, roughly 365 times more than the average worker at Stellantis, SEC filings show. GM CEO Mary Barra earned nearly $29 million in 2022 pay, Automotive News reported, which is 362 times more than the typical GM worker.

Not unique to auto industry

While those ratios may seem staggering, they're not uncommon, according to Michael Dambra, an accounting and law professor at University at Buffalo.

"It's right in line with what's been happening in the past three or four years," Dambra told CBS News.  

Triple-digit pay gaps between a CEOs and workers are also not unique to the auto industry, Dambra and other experts say. 

Back in the '60s and '70s, company executives earned "somewhere between 20 and 30 times" regular employees, but "that's massively increased, particularly in the 2000s," said Dambra.

Factoring in the nation's 350 largest companies, the CEO-to-worker pay ratio was 20-to-1 in 1965, according to the Economic Policy Institute. That figure jumped to 59-to-1 in 1989 and 399-to-1 in 2021, EPI researchers said. The CEO-to-worker pay ratio for S&P 500 firms was 186-to-1 in 2022, according to executive compensation research firm Equilar. 

Compensation for CEOs "unlimited"

That pay ratio continues to grow because CEOs are increasingly paid in stock awards. Companies often justify paying CEOs in stock by saying it aligns a corporate leader's financial incentives with the company's — ostensibly, the executive earn more if the company does well or hits certain targets.  

But companies often boost CEO pay even when executives miss their targets, the left-leaning Institute for Policy Studies said in a 2021 report that identified 50 large companies that changed their executive compensation rules during the pandemic.

Barra told CBS News last week that 92% of her pay is based on GM's financial performance in a given year. She noted that employees' total pay is also tied to performance through profit-sharing bonuses. 

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"The way that General Motors is set up, if the company does well, everyone does well," she said.

Although that may be broadly correct, employees' profit-sharing pay stops at a certain dollar amount, Dambra said, noting the $12,000 cap the UAW and automakers had in their now-expired contract. Barra's pay structure doesn't have a cap, "so essentially compensation for Mary Barra is unlimited," he said.

"As stock performance improves and stock returns go up, the share-based compensation she gets is uncapped — it's exponential, unlimited growth," Barra said. 

In:
• General Motors
• Ford Motor Company
• United Auto Workers
• Stellantis
• Mary Barra

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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