In response to strikes and union organizing drives, corporate leaders routinely insist that they simply lack the wherewithal to raise employee pay. And yet top executives seem to have little trouble finding resources for enriching themselves and wealthy shareholders.
In 2021 and 2022, S&P 500 corporations spent record sums on stock buybacks, a maneuver that pumps up stock prices by reducing the supply on the open market. Since stock-based pay makes up the bulk of executive compensation, CEOs reap huge—and completely undeserved—windfalls.
CEOs could watch cat videos all day and still reap huge windfalls through stock buybacks.
The Low-Wage 100
A new Institute for Policy Studies report, Executive Excess 2023, reveals how these financial shenanigans have widened disparities at the 100 S&P 500 corporations with the lowest median worker pay, a group we’ve dubbed the “Low-Wage 100.”
Between January 1, 2020, and May of this year, these companies reported a combined $341 billion in stock buyback spending.
Lowe’s led the buybacks list, plowing nearly $35 billion into share repurchases over the past three and a half years. In 2022 alone, Lowe’s spent more than $14 billion on buybacks—enough to give every one of its 301,000 U.S. employees a $46,923 bonus.
The idea that the person in the corner office is hundreds of times more valuable than other employees is a myth—even if that person is not just watching cat videos.
I’m guessing rank-and-file Lowe’s employees, half of whom make less than $30,000 per year, could find more productive uses for that money.
During their stock buyback spree, Low-Wage 100 CEOs’ personal stock holdings increased more than three times as fast as their firms’ median worker pay. At the 65 buyback companies where the same person held the top job between 2019 and 2022, the Low-Wage 100 CEOs’ personal stock holdings soared 33% to an average of $184.7 million. Median pay at these firms rose only 10% to an average of $31,972.
FedEx founder and CEO Frederick Smith has the largest stockpile in the Low-Wage 100. With $3.6 billion in stock buybacks since January 2020, Smith’s personal stock holdings have grown 65% to more than $5 billion. By contrast, median pay for workers at the notoriously anti-union company fell by 20% to $39,177 during this period.
Taxpayer Support for Huge CEO-Worker Pay Gaps
What makes all this even more upsetting? Taxpayers are actually supporting, through federal contracts, the buyback-fueled disparities at FedEx and 50 other Low-Wage 100 firms.
FedEx pocketed $6.2 billion in fiscal years 2020-2023 for mail services for the Veterans Administration and other agencies. The largest federal contractor in the Low-Wage 100 is another company known for union-busting—Amazon. Over the past few years, Amazon has pocketed more than $10 billion in web services deals from Uncle Sam while spending nearly $6 billion repurchasing their shares.
Fortunately, support is growing for solutions to our CEO pay problem.
Solutions to Executive Excess
Before 1982, stock buybacks were viewed as market manipulation and largely banned. President Joe Biden hasn’t yet called for reinstating that ban, but he did rail against buybacks in his State of the Union address this year and called for quadrupling a new 1% excise tax on share repurchases.
The Biden administration is also starting to use federal money going to corporations as a lever for change. In an important first step, the administration is giving preferential treatment in the awarding of new semiconductor manufacturing subsidies to companies that agree to give up buybacks. Now they should extend that policy to all corporations receiving taxpayer money.
Buybacks are not the only trick CEOs can use to inflate their own paychecks. Over my decades of research, I’ve documented how corporate leaders have used myriad shady means to hit personal jackpots, from cooking the books and moving executive bonus goalposts to creating housing bubbles and other reckless financial schemes.
To tackle this systemic problem, policymakers need to go bolder. Executive Excess 2023 offers an extensive menu of CEO pay reforms. One of the most innovative: tax penalties for companies with huge CEO-worker pay gaps. Two major cities—San Francisco and Portland, Oregon—are already generating significant revenue through such taxes. Seattle is now considering a similar approach.
The idea that the person in the corner office is hundreds of times more valuable than other employees is a myth—even if that person is not just watching cat videos. All employees contribute to the profits of a corporation, and our economy would be far healthier if the fruits of our labor were more equitably shared.
