Sarah Anderson, Global Economic Policy Director at the Institute for Policy Studies, joined the America's Work Force Union Podcast to discuss IPS’s latest report on CEO compensation at America's largest low-wage employers.
Anderson's research focuses on the "Low Wage 100" — the 100 largest low-wage companies in the S&P 500 — where CEO-to-worker pay gaps reach staggering proportions. At Lowe's, the most extreme example, the company spent $47 billion on stock buybacks over six years instead of investing in its workforce. Anderson explained that this money could have provided each of Lowe's 273,000 employees with a $28,000 annual bonus for six years, or added 88 workers to every store to address chronic understaffing issues. Instead, half of Lowe's workers earn less than $30,000 annually, while executives benefit from inflated stock values.
The mechanics of stock buybacks reveal how CEOs personally profit from these financial maneuvers. Anderson explained that share prices typically spike immediately when companies announce buyback programs. U.S. Securities and Exchange Commission studies show that CEOs tend to sell their personal stock holdings during these brief windows to maximize gains. Since most CEO compensation comes in stock-based pay, buybacks directly inflate executive earnings. Across the Low Wage 100 companies, Anderson said $644 billion was spent on stock buybacks over six years, with only three companies abstaining from the practice. This contradicts the "pay for performance" justification often used to defend excessive CEO compensation, Anderson said, because it shows the system is rigged to benefit executives regardless of actual company performance.
Anderson outlined several policy solutions to address extreme pay inequality, including increasing the corporate tax rate on companies with huge CEO-to-worker pay gaps. This approach, championed by U.S. Sen. Bernie Sanders and already implemented in some cities, would give companies a choice: maintain extreme pay disparities and pay higher taxes, or reduce gaps by lowering CEO pay or raising worker wages. The Inflation Reduction Act introduced a 1 percent tax on stock buybacks in 2022, but Anderson argued this rate is too low to change corporate behavior, as buybacks are projected to hit a record $1.1 trillion in 2025. She advocated for increasing the tax or banning buybacks altogether, noting that public opinion across the political spectrum supports reining in excessive CEO pay, however, Washington has not acted on this widespread concern.
Listen to the full episode to hear more from Anderson about the connection between low wages and excessive executive compensation, and what policy changes could create a more equitable system.
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