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

Remembering George and Anne Phillips’ Edgewood restaurant in Amenia

The Edgewood Restaurant, a beloved Amenia roadside restaurant run by George and Anne Phillips, pictured during its peak years in the 1950s and ’60s.

Provided

With the recent death of George Phillips at 100, locals are remembering the Edgewood Restaurant, the Amenia supper club he and his wife, Anne Phillips, owned and operated together for more than two decades.

At the Edgewood, there were Delmonico steaks George carved in the basement, lobster tails from an infrared cooker, local trout from the stream outside the door, and a folded paper cup of butter, with heaping bowls of family-style potatoes and vegetables, plus a shot glass of crème de menthe to calm the stomach when the modest check arrived after dessert.

Keep ReadingShow less
Artist Alissa DeGregorio brings her work to Roxbury and New Milford

Alissa DeGregorio, a New Milford -based artist and designer, has pieces on display at Mine Hill Distillery.

Agnes Fohn
When I’m designing a book, I’m also the bridge between artist and author, the final step that pulls everything together.
— Alissa DeGregorio

A visit to Alissa DeGregorio Art, the website of the artist and designer, reveals the multiple talents she possesses.

Tabs for design, commissions, print club, and classes still reveal only part of her work.On the design page are examples of graphic and book design, including book covers illustrated by DeGregorio, along with samples of licensed products such as coloring pages and lunch boxes, and examples of prop design she has done for film.

Keep ReadingShow less

Agnes Martin at Dia:Beacon

Agnes Martin at Dia:Beacon

Minimalist works by Agnes Martin on display at Dia:Beacon.

D.H. Callahan

At Dia:Beacon, simplicity commands attention.

On Saturday, April 4, the venerated modern art museum — located at 3 Beekman St. in Beacon, NY — opened an exhibition of works by the middle- to late-20th-century minimalist artist Agnes Martin.

Keep ReadingShow less
google preferred source

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

Falls Village exhibit honors life and work of Priscilla Belcher

Hunt Library in Falls Village will present a commemorative show of paintings and etchings by the late Priscilla Belcher of Falls Village.

Lydia Downs

Priscilla Belcher, a Canaan resident who was known for her community involvement and willingness to speak out, will be featured in a posthumous exhibition at the ArtWall at the Hunt Library from April 25 through May 15.

An opening reception will be held from 5 to 7 p.m. on April 25. The show will commemorate her life and work and will include watercolors and etchings. Belcher died in November 2025 at the age of 95.

Keep ReadingShow less
Crescendo’s 'Stepping Into Song' blends Jewish, Argentine traditions

The sounds of Argentine tango and Jewish folk traditions will collide in a rare cross-cultural performance April 25 and 26, when Berkshire’s Crescendo presents the choral program “Stepping Into Song.”

Christine Gevert, Crescendo’s founding artistic director, described the concert as “a world-class, diverse cultural experience” pairing “A Jewish Cantata” with Martin Palmeri’s “Misa a Buenos Aires.”

Keep ReadingShow less
Salisbury Rotary brings Derby race-day flair to Noble Horizons for community fundraiser
Salisbury Rotary Club President Bill Pond and his wife, Beth, dressed for the occasion during last year’s Kentucky Derby Social.
Provided

SALISBURY — As millions tune in to the Kentucky Derby at Churchill Downs on May 2, a spirited local tradition unfolds in Salisbury, where the pageantry, fashion and excitement of race day are recreated — with a community purpose.

For the past six years in the Community Room at Noble Horizons, all eyes turn to the big screen as the crowd settles in, drinks in hand and anticipation building. Women in elaborate Derby hats — bursting with oversized silk flowers, feathers and playful cutouts — mingle with men dressed for the occasion in crisp jackets and bow ties, fedoras and the occasional red rose on a lapel.

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.