Other paths to better pay
by Froma Harrop
May 20, 2014 12:00 AM | 711 views | 0 0 comments | 20 20 recommendations | email to a friend | print
Portrait of Froma Harrop
Portrait of Froma Harrop
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Did you read about investors in Chipotle Mexican Grill rejecting the outlandish pay package the fast-food chain’s two CEOs had cooked up for themselves? Stockholders overwhelmingly booed the mega-million payout, which would have come on top of the $300 million the duo have harvested in recent years.

By the way, the average starting salary at a Chipotle Mexican Grill restaurant is $21,000. And one of the CEOs, founder Steve Ells, makes 778 times the median salary at the chain.

Traditionally, investors looked the other way at ridiculously inflated executive pay when the company was making them money, and Chipotle has been undeniably successful. But now the coverage — on the financial pages — cites concern by stockholders that with soaring income inequality in the news, such money grabs are bad for business.

Thus, in an age of weakened private-sector unions, here is a path for workers to wrest a fairer deal. Make clear to investors that gross inequity in pay will go neither unnoticed nor unremarked upon. Note that many customers are fuming about the obscene pay gaps at their own companies.

It’s much more effective to make low wages a business matter than a moral one. Shame is a weak tool to use these days. Greed is a fuzzy concept, and foes will accuse its users of harboring a radical philosophy.

Besides, many executives care more about what their peers in Aspen or Greenwich think than what their workers do. In these circles, majestic paydays may be a cause for admiration, not censure.

The typical CEO in America now makes 331 times what the average worker does. In 1980, chief executives were paid 42 times the average employee’s salary. Why the difference?

After World War II, a social “norm” had been established discouraging executives from taking princely pay while doling serf wages to the laborers, MIT economist Frank Levy explains. That restraint is gone.

The Dodd-Frank reforms attempted to restore some of it by including an item called “say on pay.” It lets shareholders vote on executive compensation plans. The vote is nonbinding — that is, the board can ignore it — but it is certainly on record.

The globalization of business has led to a globalization of organized labor, providing workers another means of applying pressure. The fast-food movement, organized by the Service Employees International Union, links American workers with unions from Dublin to Seoul. After all, the hamburger chain they work at in Cleveland also has stores in Venice (McDonald’s has three), Istanbul and Manila.

Fast-food workers in 230 cities worldwide recently staged a one-day strike/protest. Theirs is the lowest-paid occupation in this country, typically offering $9 an hour for strenuous work. President Obama has proposed raising the federal minimum wage to $10.10 from the current $7.25.

The fast-food movement has made $15 an hour its goal.

Last year, House Republicans voted in unison to kill a bill that would have set a $10.10 minimum. Senate Republicans have now taken up the cudgel against raising the wage, thus ignoring the sage advice of 2012 GOP presidential nominee Mitt Romney to go along with the politically popular measure.

Perhaps a national $15-an-hour minimum would be too jarring an increase (though prosperous Seattle seems on the way to it), but something is going to break. A quick approval of a $10.10 wage might take some heat off efforts to obtain even more.

To recap: Union negotiations aren’t the only path to better pay. Workers can persuade investors to mind their companies’ employee relations. They can create a global PR headache for low-paying businesses. And they can agitate for a higher minimum wage.

Froma Harrop is a columnist for The Providence Journal.
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