You Won't Believe What This Bank CEO Earns After a 30% Pay Cut

While everyday employees lose their jobs, CEOs remain ultra wealthy, even after pay cuts.

You have to feel for David M. Solomon, chief executive of Goldman Sachs. Under Solomon's watch, the bank lost billions of dollars and was forced to admit to breaking the law for abetting the theft of Malaysia's sovereign wealth fund. The rank-and-file staff certainly felt the backlash, with 3,200 employees laid off just last month. As for Soloman, now that his annual salary has been slashed by 30%, he'll have to find a way to live on $25 million.

Alternate realities

In reviewing the numbers, the Economic Policy Institute (EPI) found that, adjusting for inflation, CEO pay increased by 1,322.2% between 1978 and 2020. That translates to growth roughly 60% faster than stock market investments. Even during the start of the COVID-19 pandemic, when millions lost their jobs, CEO compensation jumped by just shy of 19%.

EPI found that if the typical CEO in a large company begins their workday at 9 a.m., by 3:37 p.m. that same day, they will have earned $58,260. Meanwhile, the average annual income across the U.S. comes in at $63,214, and 1 in 3 Americans cannot afford to cover a $400 emergency.

In a report focusing on the 300 U.S. corporations with the lowest median pay, EPI found that the median worker's income did not keep pace with inflation in 106 of the 300 companies. The average CEO-to-worker pay ratio in those 300 corporations was 670-to-1. In other words, for every dollar a worker earned, the CEO raked in $670.

While those at the top are sure to extol the virtues of capitalism, the rest of the country worries about things like finding money to buy shoes for their kids and whether they'll have to claim bankruptcy due to medical bills.

There's a word for it

A word that's caught on is "greedflation." It helps explain how the rising cost of consumer goods, like groceries and gasoline, is not entirely due to trade disruptions brought on by COVID-19. The AFL-CIO released a new report last month, and according to that report, corporate greed is as much to blame as supply chain hikes.

The AFL-CIO's annual Executive Paywatch Report provides a database tracking CEO-to-worker wage ratios for more than 20 years. And while CEOs blamed price increases on all things pandemic-related, inflationary pressures, and the high cost of worker wages, the raw data tells the real picture.

For example, the company line has been that inflation is due, in part, to the rising cost of wages. The truth is, after adjusting for inflation, workers' real wages fell by 2.4% in 2021. That's 2.4% less in employees' checking accounts and 2.4% less with which to pay bills. What has not fallen is company profits or CEO compensation. The AFL-CIO calls runaway CEO pay "a symptom of greedflation."

A perfect example of this can be found at Amazon and CEO Andy Jassy. In 2021, the CEO of Amazon received a total compensation package of $212.7 million. At the same time, the median pay for an Amazon employee was just under $33,000. The CEO-to-worker pay ratio in this case was 6,474-to-1.

A potential solution?

According to EPI, policies should be passed that increase the ability of shareholders to exercise greater control over CEO pay. The group also suggests that there should be a tax policy penalizing corporations for excess CEO-to-worker pay ratios.

Talking heads have spent the past few years bemoaning the lack of loyalty among employees and questioning why so many people were unwilling to go back into their old jobs as pandemic restrictions eased. If they really want to know what's going on, perhaps taking a closer look at the built-in inequities in the workplace would be a good place to start.