Why the CEO-Worker Pay Gap Is Wider Than Ever

Jeff Bezos makes slightly more than $13 an hour. Photo: Pawan Sharma/AFP via Getty Images

The COVID pandemic has helped compound many economic trends that were already in evidence. One of them is the huge gulf between the pay of CEOs and average workers. On the latest Pivot podcast, Kara Swisher and Scott Galloway talk about how and why top executives are still being rewarded handsomely even if they preside over middling results, and what can be done to give workers a fairer shake.

Kara Swisher: Scott, we’re back. The pay gap between workers and CEOs grew even further during the pandemic with some executives receiving the largest compensation packages on record. The New York Times looked at the survey of the 200 highest-paid CEOs of public companies and found that 68 percent of companies with the largest pay packages had wider gaps between executives and employee pay after the pandemic. In addition, eight of the top-running executives got compensation in 2020 worth more than a hundred million dollars. DoorDash, Palantir, Opendoor all reported net losses, yet the CEOs of these companies made $413 million, $1.1 billion, and $370 million, respectively. This is nothing new. According to the Economic Policy Institute, CEO take-home pay grew by around 1,200 percent from 1978 to 2019. Meanwhile, the compensation for typical workers grew by 13.7 percent. So this is on top of what we talked about last week and then the week before. One, the no paying of taxes. The other, global corporate tax rates. Scott, what the heck?


Twice weekly, Scott Galloway and Kara Swisher host Pivot, a New York Magazine podcast about business, technology, and politics.

Scott Galloway: You have to understand the mechanics to address a solution. In Germany, at least a third, sometimes half, of your board of directors has to be representatives of a union of workers. And so they spend a lot of time talking about how they share profits with the people on the factory floor. And what do you know? Income inequality in Germany isn’t as frightening as it is here in the U.S.

This is what we do on the boards of public corporations in the U.S.: Generally speaking, the CEO of any company is the most likable person you’re ever going to meet. That’s how you become a CEO. They’re really hardworking. They’re really smart. And guess what: They were chairman of the social committee or the rush chairman at their fraternity or sorority. They are really likable people. And then, at the end of the year, the compensation committee that determines the CEO’s pay hires, for $120,000, Towers Perrin [a consulting firm] to come in and say, “All right, this is a $5 billion quick-service restaurant. And CEOs from zero to 100 percent — 100 percent the highest paid, zero the lowest paid — in this category of this size company made X at 50 percent.” And they go, “Okay, the person at the very center made $7 million.” But then they go, “But Bob or Sally are really nice, and they’re working really hard and they’re doing a good job. We’re not going to pay them 50 percent. We’re going to pay him 70 or 80 percent, even if they’re doing just a mediocre job,” because the people at 50 aren’t exactly hacks. People in the middle of Fortune 500–company CEOs are really good. What does that do? Why is it so crazy? It has an exponential effect. Because if you’re increasing the pay of a CEO 10 percent every year, that means every seven years it’s doubling. And meanwhile, there’s no one in the board meeting going —

Swisher: Stop them.

Galloway: “Fuck that. We’ve got to increase the pay of the people.” And what amazes me, Kara, is all these conversations in the media where everyone acts so surprised that people aren’t returning to work. And it’s like, how can CEOs that are making this kind of money be shocked that people don’t want to come to work for them for 13 bucks an hour? That’s the story. You’re really surprised? That’s really a shocker to you? And then, by the way, once they get this compensation, the CEO of Palantir, who made $1.1 billion, who’s now taking shareholder money to invest in other SPACS in exchange for them buying Palantir services, so basically total bullshit inorganic juicing —

Swisher: That’s an AOL trick. That sounds familiar to Kara Swisher.

Galloway: That’s right, you wrote a book on it. And then I have $1.1 billion. And by the way, I will never pay taxes on it because I will borrow $25 million a year against that $1 billion at an interest rate of one percent. And I will let that $1.1 billion grow, rather than cashing out and getting $600 or $700 billion. If I grow 8 percent of $1.1 billion in 30 years or 20 years, I end up with $3 billion and owe $2 million in margin. That’s fine, though — otherwise it would have been a billion or a billion and a half. So we have been totally overrun by the shareholder class. And I consider myself part of that class. It’s like, “Okay, at what point does it stop?” Where do we hit a wall here and say, “Okay, we can only print so much money. We can only charge our grandkid’s credit card so much money.” And all roads lead to the same place. We’re not going to reduce government spending. We’ve never been able to; it always averages between 21 percent and 24 percent of GDP unless there’s some sort of crisis. The only cohort, the only place to go is corporations and the super-wealthy or some sort of other transaction tax. It’s really become Crazytown. It’s so crazy. I worry that people aren’t that alarmed by it any longer.

Swisher: Well, once again, it’s sort of a troika here. You’ve got the corporate tax rates, which need to be reformed. You’ve got people not paying taxes. And then you have this compensation, which you can’t get taxes out of. So they’re richer than ever, without paying more than ever, and then the corporations don’t pay. Someone at some point who is making money has to pay for things. The fact that this has been lost as something in our society … And again, the number for a typical worker is 13 percent over those years, while the other is 1,200 percent. You don’t need to be a math expert to understand what that means at all. It doesn’t make any sense. And I think more populism is what’s going to happen. But someone is going to have to stop paying themselves quite so much and pretending that the center of innovation rests with them. Because it doesn’t. It just doesn’t.

Galloway: It’s got to be fairly mandated because if you put yourself in the shoes of a CEO —

Swisher: Like we talked previously, like, “Oh, we don’t want to be told what to do by government.” That’s the thing.

Galloway: Well, but the thing is, a lot of CEOs will say, “All right, I’m going to become philanthropic,” but what do you end up with? You end up with basically people deciding that government and public policy is based on rich people’s priorities. And by the way, rich people have not had the same American experience as a lot of America, so they’re not the ones that should be deciding. But it’s just naïve to think that this will happen unless there’s government action.

Wherever there’s incredible stock-based increase in compensation, you’re going to find absolutely extraordinary CEO-level, executive-level compensation. And it’s all a racket. The directors get stock-based compensation, and it’s all go along, get along. And there’s no representation of the frontline worker on these boards. I think, actually, a German model is really interesting. I think things will start at the board level. What if we put two or three or even just one person in there and said, “Okay, this person represents, they’re a fiduciary for your lowest-paid employees. That’s what they’re there for.”

Swisher: Yep. Yep, I agree with Scott Galloway. All right, Scott. What’s going to happen next week? Let’s see, they’re not paying taxes, and they get paid too much. They’re going to start hunting people, right?

Galloway: Yeah, drinking the blood of kids.

Pivot is produced by Caroline Schagrin.

This transcript has been edited for length and clarity.

Why the CEO-Worker Pay Gap Is Wider Than Ever