Some politicians are hell bent on eliminating billionaires and cutting CEO pay with the implication that all that money should be given to workers. While it sounds appealing to many, I wonder if anyone actually does the math.
Such rhetoric is intended to divide us, and it is dangerous.
The fact is for S&P companies, which are the target of this wrath, reducing the CEO compensation to zero and giving it to workers would be insignificant to workers and more expensive for companies to provide.
Keep in mind that only about one-third of executive compensation is cash. The rest is stock awards of various types. The stock has no value until it can be sold which is restricted for several years in most cases.
In any case, let’s do some math. The CEOs total compensation is $22,000,000 of which $13.2 million is shares of stock. The company employs 125,000 full-time workers. Here is the formula:
The CEOs compensation is equal to $176 per worker or $0.084 per hour which equals $3.38 a week. Since workers likely want cash, that equals $1.35 per week.
That raise to workers costs the employer more than it appears because to that must be added federal and state payroll taxes and the cost of any benefits that are pay related; vacation, sick time, pension, 401k match, etc.
The attacks on CEO pay (don’t get me wrong, they are not all worth what they receive) is as ludicrous as the attacks on health insurance company profits where it is implied those profits are a major factor in health care costs and premiums, they aren’t. Take the gross profit from health insurance sales for any insurance company and divide that amount by the number of policies in effect and see the impact on premiums. It’s quite insignificant.