'Undercover Boss' Salaries: When Equality Disappears

Every week, CBS's (CBS) popular show Undercover Boss features a business executive fumbling his way through a much lower-echelon job. The message tends to be redemptive: As the suit in question gets to know a few underlings and explores the company from a worm's-eye level, he inevitably emerges a better, more knowledgeable person. The basic theme of the show is that, beyond the perks and the big office, there really isn't that much separating people on the bottom and the top of a company.

While heart-warming, this lesson doesn't extend to paychecks. According to data released by the AFL-CIO, the average CEO in 2009 made 263 times as much as the average worker in his or her company, which means that these business leaders made more money on their first day of work than their average workers made all year. By comparison, the average CEO in 1980 made 42 times as much as the average worker.

Income Disparities on Undercover Boss

This certainly plays out on Undercover Boss, where most of the executives make over $1 million per year. For example, GSI Commerce (GSIC) CEO Michael G. Rubin, who appeared in the first season of the show, brought home more than $2.3 million in 2009. By comparison, the average customer service representative at his company makes $10.16 per hour, or just over $20,000 per year. Rubin's fumbling enthusiasm as a customer service rep was fun to watch, but a certain pathos sets in when one realizes the patient co-worker who tutored the CEO through his mistakes brings home less than 1% of his boss's yearly wage.

The ratio between Rubin and his lowest-paid workers is about average. With stock options included, Chris McCann, the president of 1-800-Flowers (FLWS), makes $1,311,031, or about 100 times the salary of a customer service rep at his company. The same goes for Great Wolf Lodge (WOLF), where the average call center employee makes about 1.1% of the $1.7 million that goes to CEO Kimberly K. Schaefer. And Michael White, CEO of DirecTV (DTV), brought home about $1.5 million in 2009, 100 times the average salary of a DirecTV customer service representative.

CEOs Paid More...For Quitting

CEOs often make more than their workers -- even when they stop working. For example, when Lawrence O'Donnell III, CEO of Waste Management (WM) left the company earlier this year, he took home a severance package of $1.6 million, almost 50 times the yearly salary of the average garbage truck driver at his company.

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These salary comparisons, while striking, are only part of the issue. In addition to high pay and attractive golden parachutes, many execs are paid to serve on the boards of other companies, receive lucrative stock options and have other sources of income. For example, O'Donnell's contract at Waste Management included a host of sweet perks, including annual bonuses of up to 120% of his yearly salary, stock benefits, four weeks of paid vacation, a hefty car allowance, country club memberships, and thousands of dollars in financial planning services. Even beyond his impressive paycheck -- and golden parachute -- O'Donnell's compensation package paints a picture of an executive who lives in a world far-removed from Waste Management's rank-and-file.

Chiquita's Boss Doesn't Go Undercover in Colombia

The most egregious income disparity is at Chiquita (CQB), the massive fruit company. With a $7.6 million paycheck, CEO Fernando Aguirre ranks as Undercover Boss's highest-paid executive. While it's difficult to determine the salaries of the unskilled migrant workers that he worked alongside, a higher-echelon production manager job at the company pays $56,000 per year, or 0.7% of Aguirre's salary.

But that's only half the story. The bananas that have made Chiquita famous aren't grown in the U.S. Rather, they are produced in Latin America, where Chiquita's business practices are notorious. In 2004, workers in Honduras demanded a 75% wage increase from $4.91 to $8.60 per day. While the cost of living in Latin America is significantly lower than in the U.S., Chiquita's wages are still not enough to support its workers. As Human Rights Watch noted in 2002, many families have to put their children to work to put food on the table. At Chiquita, the report noted, kids were paid $3.50 per day, or less than one-8,000th of Aguirre's salary. In other words, Aguirre makes more money in 14 minutes than an 8-year-old banana picker makes in a year.

This isn't to say that Chiquita doesn't give money to people in Latin America. In 2007, the U.S. Department of Justice investigated the company for its donations to FARC, AUC and ELN, three Colombian rebel and paramilitary groups that were later cited as terrorist organizations. Ultimately, Chiquita admitted to giving $1.7 million to AUC, and agreed to pay a $25 million fine. Under the circumstances, it's not surprising that Undercover Boss didn't send Aguirre to work in Columbia: The country has asked the U.S. government to extradite some of the company's executives so they can stand trial.

Income Disparity -- And Its Effects

In the grand scheme of things, the income disparity of the companies on Undercover Boss tends to be fairly low. By comparison, Walmart CEO Michael Duke -- who brings home $35 million per year -- makes more in an hour than an average new Walmart employee makes in a year. One effect of this income disparity is that many companies are understaffed, or filled with underskilled employees. As John DeFeo noted in The Street, reducing CEO/worker pay ratios to 1980 levels would enable the average company to hire 277 workers, a move that would go a long way toward reducing unemployment and improving service quality.

Massive income disparity may also contribute toward worker mistreatment. In a recent paper, academics from Harvard, Utah and Rice universities claimed that "higher income inequality between executives and ordinary workers results in executives perceiving themselves as all-powerful...leading them to maltreat rank and file workers." According to the authors, archival data and laboratory experimentation have shown that high incomes, combined with distance between the execs and their employees, lead to the impression that workers are "dispensable objects not worthy of human dignity."

One message of Undercover Boss is that closer contact between workers and executives may encourage better relationships across companies. But as long as massive income disparities continue, workers and bosses in search of respectful, productive relationships will face an uphill battle.

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