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Taxpayers Are Subsidizing Corporations That Pay CEOs Hundreds of Times More Than Workers, Study Shows

Author says the findings should fuel the movement to "use the power of the public purse to crack down on corporations that refuse to share the wealth."

A sign is displayed from an Occupy Wall Street protest against income inequality in 2011. (Photo: a.mina/flickr/cc)

A new report from the Institute for Policy Studies analyzing worker and chief executive pay at the top government contractors and subsidy recipients found that the majority of CEOs at these firms rake in more than 100 times the median pay of their full-time employees.

"This new data should boost the already growing movement to use the power of the public purse to crack down on corporations that refuse to share the wealth."
—Sarah Anderson, Institute for Policy Studies

For example, Lockheed Martin gets more taxpayer money in government contracts than any other publicly held company, accounting for 97 percent of its overall revenue. At Lockheed Martin in 2017, the median compensation for an employee was $123,231, while CEO Marillyn A. Hewson received $22,866,843—186 times that of a typical worker.

The CEO-worker pay ratio at Lockheed Martin reflects compensation differences at the top five government contractors last year, which were all weapons and military firms—Boeing, General Dynamics, Raytheon, and Northrop Grumman. Among these companies, the average pay for chief executives was $21 million.

"This new data should boost the already growing movement to use the power of the public purse to crack down on corporations that refuse to share the wealth," declared Sarah Anderson, author of the new report, titled How Taxpayers Subsidize Giant Corporate Pay Gaps (pdf).

"Taxpayers should not be subsidizing extreme pay gaps in any way, whether through tax, contracting, or subsidy policies," Anderson concluded. The report outlines the wage gap for executives and workers at the top 50 government contractors as well as the top 50 recipients of subsidies.

While the contractors that got the most taxpayer money in 2017 were military firms, there were others that raked in millions and had notable CEO-worker pay ratios, including telecom giant AT&T (366), the healthcare company Centene (379), and DXC Technology, which paid its CEO a whopping 806 times more than its workers.

Among recipients of federal subsidies, the highest ratios were at PPG Industries (382), Honeywell International (333), and General Motors (295). At the 33 firms that received subsidies and paid executives more than 100 times that of workers, the CEOs made an average of $15 million last year.

To demonstrate the severity of the pay gap at private firms that get taxpayer funds, the report includes a comparison to the pay ratio of the average federal employee versus the president (not taking into account President Donald Trump's business empire):

Pay gaps

The report points out that in addition to having high pay ratios, The Geo Group and General Dynamics "have drawn scrutiny this year for profiting off the Trump administration's 'zero tolerance' on immigration, a policy that has pushed thousands of new migrants and asylum seekers into detention centers" and forcibly separated children from their parents.

The Geo Group, which had a pay ratio of 271, is the largest private prison operator in the country. According to Bloomberg, the firm "runs 11 immigrant processing centers around the country and one family residential center."

General Dynamics, with a ratio of 218, "also stands to profit from Trump's harsh immigration policies through contracts to process and handle the paperwork related to unaccompanied migrant children, including those forcibly separated from their families," the report notes. The company reportedly made over $4 billion on such contracts last year.

This analysis come on the heels of a report by the Economic Policy Institute (EPI) that found, as Common Dreams reported, "executive compensation surged during President Donald Trump's first year in office—as Republicans were pitching their tax plan with promises that the proposal would offer benefits and savings to middle-class and working Americans across the country."

According to EPI's review of the 350 largest U.S. companies, top executives pocketed, on average, between $13.3 and $18.9 million last year. Writing for Inequality.org this week, Bob Lord highlighted EPI's findings on the differences between pay raises, explaining that "after one hour of labor in 2017, [the average] CEO grabbed a pay increase over the previous year nearly eight times as much as the increase our worker received for the entire year."

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