What Would Happen If CEOs Slashed Their Salaries To Zero?

What would happen if CEO pay were reduced to zero?American CEOs now earn as much as 1,795 times more than their employees. Some activists have organized minimum wage workers, protesting the widening gap, noting executive pay has been rising while workers' pay has fallen. But would workers truly be better off if the bosses agreed to reduced their pay to zero?

On Wednesday, the right-leaning Washington D.C.-based research foundation Employment Policies Institute (EPI) released a report that attempts to puncture labor activists' fantasies that redistribution of executive pay would change the average workers' lives. The EPI, which is funded by restaurant, retail and manufacturing trade groups, crunched the data, looking at what would happen if the CEOs of McDonald's, Starbucks and Walmart were to give away their entire pay to the workers. The result?

Workers' pay would increase just how much per hour
Only Starbucks workers would walk away with a full extra cent per hour of work if their CEO (Howard Schultz) agreed to hand over his entire paycheck.Here's the math.
  1. McDonald's: Total CEO pay ($5,370,666) divided by total number of employees (420,000) = $0.0061 increase per hour for each worker.
  2. Starbucks: Total CEO pay ($3,806,192) divided by total number of employees (160,000) = $0.0114 increase per hour for each worker.
  3. Walmart: Total CEO pay ($6,214,777) divided by total number of employees (2,200,000) = $0.0014 increase per hour for each worker.

What the EPI Report Leaves Out
All three companies in the report have very large head-counts; Walmart, the nation's largest private employer, has more workers than European countries including Latvia, Macedonia and Slovenia have people, according to CIA statistics. Workers at smaller companies would, undoubtedly, see more appreciable gains if their executives shared or even reduced their respective salaries.

Executive Pay Isn't The Whole Story
And for workers and labor activists who are seeking to improve wages and other workplace conditions, CEO pay is just one minor part of the puzzle. As AOL Jobs has reported, companies like Costco and Trader Joe's that have used resources to pay workers well, maintain appropriate staffing levels and train workers in a host of skills have actually found success in the marketplace.

How can spending money on worker development be a successful approach when so many companies are cutting back in hard economic times? According to MIT professor Zeynep Ton, these companies have been able to keep growing because the good treatment of workers leads to better performance, increased customer satisfaction, and as a result, more business.

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