Meanwhile, CEOs are kissing like bandits. Somehow, they have us to thank for it.
Executive compensation is always top-notch, of course, but the difference now is that consumers have to accept it head-on, while C-suites get richer and profit margins rise.
Corporations know they can get away with further price increases, in part because the idea of inflation has settled into the collective psyche of shoppers. We expect to pay more and continue to buy because our salaries are a little higher.
But as price increases continue, “I think it’s going to be surprising for people when they learn more about how CEOs are actually profiting and speculating on this,” said Sarah Anderson, program director of the Global Economy Project at the Institute for Policy Studies.
it pays to be rich
An oft-cited example is Chipotle, which raised prices for consumers by 10% over the past two years, even as profits soared.
The chain’s CEO, Brian Niccol, earned $38 million in 2020, 2,898 times more than the average store-level employee. (The most typical CEO-to-worker ratio last year was 350 to one.)
Chipotle representatives did not immediately respond to a request for comment, but a spokesperson told Newsweek last year that the compensation package was “based on a competitive analysis of CEO pay levels within our group of peers and is designed to pay for performance.
A Starbucks representative tried to distinguish between menu prices and executive pay as “two completely different issues,” noting that the latter is determined by the board of directors.
“Our executive compensation program is structured to closely align with our business purpose and commitment to creating shareholder value,” the representative said in an emailed statement. As for menu prices: “There are many factors that contribute to our well-thought-out pricing strategy, which takes into account the growing 7% inflation rate, as well as wages, customer demand and other costs.”
Corporate boards decide executive pay, which is a combination of salary, bonuses and other benefits tied to various financial goals. But these boards are often packed with executives or former executives from other companies that benefit from the system. Critics of excessive executive pay often point out that those shareholders are unlikely to rock the boat, especially when profits are through the roof.
“Despite all the research to the contrary, there is a belief that the guy in the corner office is almost solely responsible for the value of the company,” Anderson said. “So you have to do everything you can to keep him happy and make sure he doesn’t go away.”