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On Thursday, Senator Elizabeth Warren (D-MA) tweeted her disapproval of Wells Fargo CEO and president Tim Sloan receiving a 36% pay raise from the board of directors. Citing claims of an “auto insurance scam,” Sen. Warren complained that Sloan has not earned the wage hike, which Sloan dismissed for being “ill-informed and inappropriate.”
Is this even her business? One can only imagine the left’s reaction if President Donald Trump were to utter similar remarks about a CNN or MSNBC executive getting a massive boost to their paycheck, despite allegations of media bias and fake news!
The likes of Warren and Senator Bernie Sanders (I-VT) have routinely railed against executive compensation for years. Joined by the unions, leftists, and other Democratic politicians, Sanders and Warren cry about how it is unfair that someone on Wall Street is making seven or eight figures per year for their duties.
It is a fun game that the left and the press play every few months or so. Whether it is the statistic that the top 100 CEOs will earn the average worker’s entire annual salary in just a couple of hours or the often-debunked CEO-worker pay gap ratio of 335-to-1, the objective is to perturb the public, who then demand their elected officials act to create a more equitable and just society through higher taxes on the rich and wealth redistribution.
Should anyone care if someone on Wall Street or Silicon Valley is accepting a double-digit hike?
Did Tim Sloan Earn the Raise?
When Sloan took over the reins from John Stumpf in October 2016, the company was engulfed in public and political scandals; everything from multiple litigation cases to the Federal Reserve restricting the financial institution’s asset growth. On top of a $190 million fine, it went through restructuring.
Since then, however, Wells Fargo has been returning to normal operations.
The company justified his compensation package – $2.4 million base pay and restricted stock totaling $15 million – because the Wall Street giant is performing quite well. As a shareholder and a member of the board, you are willing to hike the chief executive’s salary and stock options if he can deliver a higher share price and quarterly dividend.
The same thing happened at Microsoft, McDonald’s, and BlackBerry. These publicly-traded businesses struggled, but then when they tapped a new CEO, their fortunes turned around, and Satya Nadella, Steve Easterbrook, and John Chen were given greater compensation.
The Left Manipulates the Data
When Warren, Sanders, and the big unions want to spark outrage from coast to coast, they will shriek that CEOs are getting paid too much and the average worker is getting paid too little. They then add that it is time that the wealthy pay their fair share of taxes, while everyone else should be helped by the state.
Two things. First, CEOs are not getting paid too much. Second, the rich already cover most of the taxes.
Every spring, the AFL-CIO releases a report titled “Executive Paywatch.” It typically makes a grandiose claim: there is a massive gap between CEOs running an S&P 500 company and the average worker (they cite $12.4 million to a mere $36,875). But this is a ridiculously small sample size: a few hundred executives compared to 150 million American workers.
The American Enterprise Institute (AEI)’s Mark Perry uses data from CEOs of Russell 3000 companies:
The AFL-CIO’s own website reveals that the average CEO compensation of Russell 3000 companies was $5.7 million last year, which would cut the 335-1 ratio by more than half to only 155-to-1.
Here is even better data that most people generally neglect: there are approximately 25,000 CEOs nationwide who earn an average salary of just under $200,000. That means the gap is only about 5-to-1.
Let’s concede, for argument’s sake, that the average CEO salary was $12 million. Does that really matter? How does that have any bearing on our lives? It doesn’t, and Sen. Warren shouldn’t lose sleep at night. Or perhaps she, like Sanders, is merely trying to justify her position in the Senate.
Playing Loose with the Facts
The left has fun playing loose with the facts. You only need to examine the gender wage gap to see how that is manipulated by politicians, celebrities, and labor organizations.
The public views CEOs as a bunch of stuffed shirts who don’t do anything. This is untrue. They are responsible for billions of dollars, tens of thousands of employees, the stock, and the company’s future. Just ask McDonald’s Steve Easterbrook or BlackBerry’s John Chen. Only a few years ago, these iconic brands were struggling and potentially flatlining. They imposed turnaround plans, and now their stocks are surging, helping retirees pay the bills or rewarding loyal shareholders.
Americans are not coerced into footing the bill for a CEO’s wages. Politicians are a different story. Each time a worker receives their paycheck, they are mandated to fork over a portion of the fruits of their labor to Washington to help pay for a senator’s $174,000 salary, plus all of the other perks and benefits. This is something to be really irked by, particularly since our elected officials do not provide any value to the taxpayers. If Wells Fargo wants to remunerate Tim Sloan, then that’s the firm’s prerogative.
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