Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIt’s been a central argument for the United Auto Workers union: If Detroit’s three automakers raised CEO pay by 40% over the past four years, workers should get similar raises.
UAW President Shawn Fain has repeatedly cited the figure, contrasting it with the 6% pay raises autoworkers have received since their last contract in 2019. He opened negotiations with a demand for a similar 40% wage increase over four years, along with the return of pensions and cost-of-living increases. The UAW has since lowered its demand to a 36% wage increase but the two sides remain far apart in contract talks, triggering a strike.
Fain’s focus on CEO pay is part of a growing trend of emboldened labor unions citing the wealth gap between workers and the top bosses to bolster demand for better pay and working conditions.
In June, Netflix shareholders rejected executive pay packages in a nonbinding vote, just days after the Writers Guild of America wrote letters urging investors to vote against the pay proposals, saying it would be inappropriate amid Hollywood’s ongoing strike by writers. The WGA wrote similar letters targeting the executive pay at Comcast and NBCUniversal.
Fain has pushed back against arguments that a big pay bump for the union would jack up costs of vehicles and put the Big Three automakers—General Motors, Ford and Stellantis (formerly Chrysler)—at a disadvantage against foreign competitors with lower-cost workforces in the race to transition to electric vehicles.
“The reason we ask for 40% pay increases is because in the last four years alone, the CEO pay went up 40%. They’re already millionaires,” Fain told CBS’ “Face the Nation” on Sunday. “Our demands are just. We’re asking for our fair share in this economy and the fruits of our labor.”
CEO pay has ballooned for decades, while wages for ordinary workers have lagged. But did the Big Three chief executives really get 40% pay increases? Not exactly.
“I don’t know where the 40% came from,” said General Motors CEO Mary Barra at a new conference when asked if the UAW’s numbers were accurate.
Executive pay is notoriously complicated to calculate because so much of it comes in the form of stock grants or stock options. A detailed look at the compensation packages at all three companies shows how the UAW’s claim both overstates and understates reality, depending on the view.
THE BIG THREE CEO PAY PACKAGES
Barra, the only one of the three who held the role since 2019, is the highest paid, with a compensation package of worth $28.98 million in 2022. The single biggest component was $14.62 million in stock grants, which vest over three years and whose ultimate value depends on stock performance and other metrics.
Her pay has increased 34% since 2019, according data from public filings analyzed for AP by Equilar.
Ford CEO James Farley received nearly $21 million in total compensation in 2022, a 21% increase over the $17.4 million then-CEO Jim Hackett received in 2019, according to the company’s proxy statements. Farley’s package last year included $15.14 million in stock awards, which also vest over three years with an ultimate value dependent on performance.
Where the the comparison gets complicated is at Stellantis, which was formed in 2021 with the merger of Italian-American conglomerate Fiat Chrysler Automobiles and French PSA Group. Because it is a European company, the way Stellantis discloses executive pay differs significantly from GM and Ford.
In its annual renumeration report, Stellantis reported CEO Carlos Tavares’ 2022 pay was 23.46 million euros. That’s a nearly 77% increase over then Fiat Chrysler CEO Mike Manley’s 2019 pay of 13.28 million euros.
Those are the numbers used by the UAW when it calculated that three automakers have, collectively, increased CEO pay by 40.1% since 2019, according to the methodology the union provided to The AP.
But there’s a catch: Stellantis’ figures reflect “realized pay,” which include the value of previously granted equity that vested during the reporting year. U.S. companies, in contrast, use grant date value of stock packages awarded to executives during the reporting year.
In its analysis, Equilar used the “grant date” method to make an equivalent comparison between all three CEOs. By that measure, Tavares’ 2022 compensation was in 21.95 million euros in 2022, including 10.9 million in stock awards with a three-year vesting period.
That’s actually 24% decline from Manley’s compensation package in 2019, which was 29.04 million euros, according to Equilar.
THE VOLATILITY OF CEO PAY
So, is Tavares really making less than Manley was four years ago? Not really.
That’s because in some years, talking about a CEO’s “realized pay” can obscure exorbitant pay packages approved by company boards.
Take Tavares’ 2021 compensation package, which included special incentive award of 25 million euros in cash as well as stock worth 19.56 million euros—all contingent on long-term performance goals—granted to Tavares in recognition of “his essential role” in leading the company through the merger.
That one-time award, which came on top of millions of more in regular compensation, alone pushed Tavares’ 2021 compensation package far above what Manley got in 2019.
Stellantis shareholders voted 52.1% to reject the pay proposal in their annual meeting, though the vote was only advisory and the board approved his package anyway.
The CEOs of GM and Ford also saw their compensation packages peak in 2021, before declining slightly in 2022.
HOW DOES ALL THIS COMPARE TO REGULAR WORKER PAY?
However you slice the numbers, the gap between CEO pay and rank-and-file workers at all three companies is gigantic.
At GM, the median worker pay was $80,034 in 2022. It would take that worker 362 years to make Barra’s annual compensation.
At Ford, where the median pay was $74, 691, it would take 281 years.
At Stellantis, with a median pay of 64,328 euros, it would take 365 years, although the company noted its annual report that the disparity includes expenses related to Tavares’ one-time grant. Excluding that, the pay ratio is 298-1.
How extreme that disparity? It depends on the comparison.
It’s far above the typical pay gap at S&P 500 companies, which was 186-1 according to AP’s annual CEO pay survey, which uses data analyzed by Equilar.
And it’s astronomical by historical standards. According to a study of the 350 largest publicly traded U.S. firms by the left-leaning Economic Policy Institute, the CEO-to-Worker pay ratio was just 15-1 in 1965.
The automakers, for their part, emphasize that their foreign competitors pay their workers much less. Including benefits, workers at the Detroit 3 automakers receive around $60 an hour, according to Harry Katz, a labor professor at Cornell University. At foreign-based automakers with U.S. factories, the compensation is about $40 to $45.
Then there’s Tesla.
CEO Elon Musk’s 2022 compensation was reported as zero in the company’s proxy statement, rendering its official pay ratio meaningless. Of course, that’s because Tesla hasn’t awarded Musk new packages since a 2018 long-term compensation plan that could potentially be worth more than $50 billion and is facing a legal challenge from shareholders.
But the proxy offers glimpse at the mind-boggling wealth disparity between its nonunion workers and one of the world’s richest men.
The filing reported Musk’s total “realized compensation” in 2021 at more than $737 million. A typical Tesla worker earned $40,723 that year.
According to the proxy, for that worker to make Musk’s “realized compensation” that year, it would take more than 18,000 years.
Please enable JavaScript to view this content.
Typical Marxist drivel.
What’s telling is the vast increase in the pay ratio over my lifetime (I was born before 1965). That ever-increasing gap between top and bottom at almost every major corporation hardly constitutes “Marxist drivel”…it’s real.
It’s real, and it’s also why populist candidates (even the one claiming to be a billionaire) get traction with working-class voters. They’re correctly asserting that the system that excessively rewards the top management cheats them out of middle-class wages.
John M.
+ 1
Just curious,
1). How many people is the UAW worker responsible for besides himself? Easy answer! ZERO
2). The average UAW worker is not responsible for tens of thousands of employees or hundreds of billions of dollars in assets.
3). Is the average UAW employee held accountable to the share holders that
own the company. NO!
4). You could take away the entire pay of the CEO and divide it by the number
of employees and it wouldn’t amount to much at all.
Last we know why the Biden Administration is squarely on the side of unions.
Because the unions are the largest or second largest contributors to the
Dem Party.
There not saying that the CEO shouldn’t get paid more, they are just pointing out if CEO’s pay can go up by 40%, there is justification for not expanding the already huge pay gap, and raise workers wages accordingly. Plus, you have to look record profits raked, and still wonder why the workers don’t get more of that since they were the ones acutely making the products.
Dan +1
Maybe some of these people are high paid corporate executives commenting? Try to support a family on $16 an hour and let me know how that works out. The middle class is disappearing and it’s sad.
Dan M.
You wonder why all the auto manufacturers and suppliers have been locating
in the right to work States??? The bulk of them locating in the south.It’s because of the UWA entitlement mentality
Should a guy pushing a broom make as much as a doctor?? Obviously not.
Thevteasons are obvious.
Keith S.
I’ve did the blue collar physical labor jobs for several decades. Lifting, pushing,
and pulling heavy equipment on the truck docks in the blazing heat and freezing cold day in and day out.
We made the union pay wages without the union protections in a very tough working jEnvironment. I mean in a tough working environment.
**. In that entire time, NEVER once did I ever worry about what the CEO or what they Plant manager was making. ***.
So please don’t lecture!
This is going to be interesting to say the least. How it ends and plays out is anybody’s guess.
So when an NFL player receives a 40% increase in their contract, does that mean everyone that works in Lucas Oil stadium should get a 40% raise.
Try to track here. The comparison would be with the Stadium Manager who runs the venue, not the performers. I’m sure that the stadium manager doesn’t make 382 times what the cleaning crew or concession cashiers make. I’m also sure the CEO of my organization doesn’t make 382 times the lowest wage in the organization, either.