A modest economic proposal

About 30 years ago I was co-authoring a book with a CEO of a multi-million-dollar private company, and he informed me that he was going on the board of a larger public company at the behest of its two new controlling owners, clients of his, and that they had decided to take salaries of just $1 apiece per year and tie the rest of their compensation to rises in the stock price. Once the insider-trading window was closed, I bought the stock. After a year, the stock price had not risen enough to trigger the bonuses, and the board of directors decided that the next year the co-CEOs would take salaries of $1 million each, which I thought was perfectly fair; once again, they would earn considerably more if the stock price rose. It didn’t, and when the board decreed that in the third year the co-CEOs would get $10 million each, I decided it was time to sell. 

I tell this story as prelude to making a modest proposal: to cap American CEO salaries at a certain multiple of the salaries paid to their companies’ lowest-paid employees. 

Currently, many large-scale American employers have an enormously high ratio of the top manager’s salary to that of the floor-level worker in that company’s place of manufacture.  For example, Mary Barra of GM makes around $22 million a year, which­ — according to a company press release — is 281 times that of the median General Motors’ employee. If the median salary is $78,291, then the actual lowest-paid worker at a GM plant is likely being paid quite a bit less than that. And this, in a heavily unionized firm. 

A recent study of publicly held American firms shows that the “compensation ratio,” the top-salary-to-bottom-salary ratio, has risen about 1,000% since 1978. More than 100 American CEOs bring home $10 million or more apiece, many of them able to accumulate $100 million in five years. Another study shows that the CEOs of the top 3,000 firms (!) make an average of over $2 million apiece.  A third study, of 1,600 privately held American firms shows average CEO compensation at about the same level, that is, over $2 million per year. 

Does it have to be this way? Not at all. The ratio in the U.K. is 22, in France it is 15, and in Germany it is 12. (All other countries’ ratios are lower.) The average pay for a CEO in France is around €150,000, with the high end at €250,000. Bonuses keyed to accomplishments, and profit sharing, raise that compensation to €300,000. When France mandated a maximum top-to-median-salary ratio, there was a threatened exodus from the country of companies and headquarters, but that has not materialized. 

Now I am not someone who thinks CEOs don’t earn their high salaries. I co-wrote books with several CEOs who ran multi-billion-dollar companies, and was uniformly impressed at how hard they worked, and how much they did for their companies’ bottom lines. Sixty-hour weeks were the norm, and there was a tremendous amount of pressure to perform each and every day.

Let’s suppose we in America set a top-to-bottom ratio of 40, which is quite high historically but is regularly exceeded in the U.S.  If the lowest-level employee makes the minimum wage of $15 an hour, the CEO would make $600 an hour, which at 40 hours per week translates to $1,248,000 per year. 

Under this rubric, if a company wanted to bring up its CEO’s pay, it could do so easily by simultaneously raising the lowest-level salary, say, from $15 to $20- $25 an hour. A win-win situation. Actually, a win-win-win, because under such a ratio, stockholders would be assured that not too much of the company’s income would be going out to executive management salaries. Profits might actually increase, along with dividend payouts, since dividends are a prime way to add to the compensation of executives who have been given stock options.

How to do it? The ratio could be mandated federally, or if that is too difficult to accomplish politically, it could just become an executive-office policy guideline, extolled and labeled as socially-desirable. I can easily imagine there coming into existence an independent watchdog whose job would be to flag companies that do not observe the ratio and publicize those companies’ stinginess and their executives’ excess greed.   

I do not expect that if such a ratio were put in place in the U.S., that companies would suffer, or even that the CEOs would do so.  I do expect that lower-echelon salaries would rise, along with internal profit-sharing for those lower ranks, in order to meet the ratio and justify keeping CEO salaries in the stratosphere. 

 

Tom Shachtman is the author of more than a dozen American and world histories and of documentaries seen on all the major networks. He lives in Salisbury.

The views expressed here are not necessarily those of The Lakeville Journal and The Journal does not support or oppose candidates for public office.

Latest News

Sharon voters reject controversial school budget, 114-99

The May 8 town meeting and budget vote were moved from Sharon Town Hall to Sharon Center School to accommodate what officials said was the largest turnout for a Sharon budget meeting in recent years.

Alec Linden

SHARON – More than 200 residents packed the Sharon Center School gymnasium Friday, May 8, where voters narrowly rejected the Sharon Board of Education's proposed 2026-2027 spending plan by a vote of 114-99, sending the budget back to the Board of Finance after weeks of heated debate over school funding.

The rejected proposal – the ninth version of the budget since deliberations began months ago – carried a bottom line of $4,165,513 for the elementary school, unchanged from last year. The flat budget came after the BOF ordered the BOE in early April to remove nearly $70,000 from its spending plan.

Keep ReadingShow less

Liane McGhee

Liane McGhee
Liane McGhee
Liane McGhee

Liane McGhee, a woman defined by her strength of will, generosity, and unwavering devotion to her family, passed away leaving a legacy of love and cherished memories.

Born Liane Victoria Conklin on May 27, 1957, in Sharon, CT, she grew up on Fish Street in Millerton, a place that remained close to her heart throughout her life. A proud graduate of the Webutuck High School Class of 1975, Liane soon began the most significant chapter of her life when she married Bill McGhee on August 7, 1976. Together, they built a life centered on family and shared values.

Keep ReadingShow less
‘Women Laughing’ celebrates New Yorker cartoonists

Ten New Yorker cartoonists gather around a table in a scene from “Women Laughing.”

Eric Korenman

There is something deceptively simple about a New Yorker cartoon. A few lines, a handful of words — usually fewer than a dozen — and suddenly an entire worldview has been distilled into a single panel.

There is also something delightfully subversive about watching a room full of women sit around a table drawing them. Not necessarily because it seems unusual now — thankfully — but because “Women Laughing,” screening May 9 at The Moviehouse in Millerton, reminds us that for much of The New Yorker’s history, such a gathering would have been nearly impossible to imagine.

Keep ReadingShow less
google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.

By any other name: becoming Lena Hall

By any other name: becoming Lena Hall

In “Your Friends and Neighbors,” Lena Hall’s character is also a musician.

Courtesy Apple TV
At a certain point you stop asking who people want you to be and start figuring out who you already are.
Lena Hall

There is a moment in conversation with actress and musician Lena Hall when the question of identity lands with unusual force.

“Well,” she said, pausing to consider it, “who am I really?”

Keep ReadingShow less
Remembering Todd Snider at The Colonial Theatre

“A Love Letter to Handsome John” screens at The Colonial Theatre on May 8.

Provided

Fans of the late singer-songwriter Todd Snider will have a rare opportunity to gather in celebration of his life and music when “A Love Letter to Handsome John,” a documentary by Otis Gibbs, screens for one night only at The Colonial Theatre in North Canaan on Friday, May 8.

Presented by Wilder House Berkshires and The Colonial Theatre, the 54-minute film began as a tribute to Snider’s friend and mentor, folk legend John Prine. Instead, following Snider’s death last November at age 59, it became something more intimate: a portrait of the alt-country pioneer during the final year of his life.

Keep ReadingShow less
Sharon Playhouse debuts new logoahead of 2026 season

New Sharon Playhouse logo designed by Christina D’Angelo.

Provided

The Sharon Playhouse has unveiled a new brand identity for its 2026 season, reimagining its logo around the silhouette of the historic barn that has long defined the theater.

Sharon Playhouse leadership — Carl Andress, Megan Flanagan and Michael Baldwin — revealed the new logo and website ahead of the 2026 season. The change reflects leadership’s desire to embrace both the Playhouse’s history and future, capturing its nostalgia while reinventing its image.

Keep ReadingShow less
google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.

google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.