Where Is Our Incentive Pay? 

The CEOs of America’s biggest companies saw their median pay rise to $11.6 million last year, an all-time high. Of course, stock values are hitting all-time highs as well. These huge pay packages are a reward. So what about the rest of us?

The Wall Street Journal reports that for the CEOs of the 133 largest companies, “Total pay…rose at least 9.9% for half the executives, the fastest annual growth since 2014, while about a quarter of the executives received raises of 25% or more. Most of the gains came from stock awards, as firms largely held the line on cash compensation and stock options.” Which is to say that most chief executives received not only a healthy, seven-figure guaranteed salary, but also healthy bonuses that directly rewarded them for increases in the value of their companies. A 10% increase in annual pay is nothing to scoff at. Particularly not when you’re making more than ten million dollars a year.

Profits rise. The value of the company rises. And, in turn, compensation rises. This is the basic way that corporate leaders argue that they should be paid. There are very good arguments that there is no justification for CEOs being paid several hundred times the amount of their average workers, as many are now, but the basic proposition—rising pay in proportion to rising profit—is defensible. It reflects the widely accepted idea that people should share in the value that they create.

So what about all the rest of us?

These companies have hundreds of thousands of workers. These workers quite literally create the value of these companies. It is absurd to argue that a CEO should share in that value, but the people who do the actual work should not. But that is the way that companies in fact operate. In 2017, the biggest companies saw their stock values rise by nearly 20%. The CEOs of the biggest companies saw compensation increases of nearly 10%. But median wage growth for American workers has remained well under 4% for nearly the entire decade since the last recession.

This is not fair. A child can tell that it’s not fair. It is nothing but the looting of corporate profits by those who are entrusted with the keys to the safe. You can be absolutely sure that working people will share in the downside of bad times for the company. Wage growth will halt and layoffs and cutbacks will come. Companies are very good about sharing the downside. When it comes to sharing the upside, they seem to be much more absentminded.

This is not an argument that the CEO should be paid the same as the receptionist. It is quite easy to have a system similar to what we have now—where salaries increase with seniority and title—and still have bonuses accrue to people in all of those positions based on a common fair share of the value that the company creates. If the boss deserves a 10% pay increase for a good year, the workers deserve the same. If you are concerned that this might somehow warp the “incentive” to advance one’s career, don’t be. Executives get paid more. Equal percentages will always reward them with greater absolute numbers. This is not even an argument for socialism. This is an argument for somewhat more fair capitalism. The socialism will come with time.

Your boss will tell you that you are a valuable member of the team. Take those words at face value. You do not need to demand anything insane. All you need to demand is your fair share. We all deserve some of the value we create. If your pay didn’t go up as fast as the boss’s last year—why not? Tell your company that you fully support the rationale for the CEO’s pay scheme. As long as everyone else gets it too.