Since the struggle for American independence, times of national crisis have called for shared sacrifice.
In World War II, for example, a number of top business executives became “dollar-a-year men” who donated their know-how to the war effort for a token sum. To those on the front lines, that sort of sacrifice sent a powerful message: “We are in this together.”
In good times and bad, the corporate incentive system often rewards business practices that sharpen our economic and social divides.
This past year of crisis should have been another period of unity and shared sacrifice. Instead, many top corporate executives enriched themselves while their front-line employees shouldered the burden of the pandemic.
Executive pay soared
At big U.S. corporations, CEO pay soared while COVID raged.
Our Institute for Policy Studies analysis of SEC filings of the 100 largest low-wage employers found that over half rigged their own rules to inflate CEO pay in 2020. Compensation for top executives went up by 29% at those firms while median worker pay dropped by 2%.
In good times and bad, the corporate incentive system often rewards business practices that sharpen our economic and social divides. Slashing labor costs by shipping U.S. jobs overseas, for instance, increases ordinary American families’ economic insecurity but enhances the value of executives’ stock-based compensation. Slashing IRS bills by recording profits in offshore tax havens can also enrich CEOs while draining revenue for vital public services.
The congressional debate over infrastructure spending offers an enormous opportunity to change these incentives.
Leading companies are positioned to receive a huge infusion of taxpayer dollars to strengthen our nation’s roads, bridges, and mass transit systems and speed the transition to clean-energy technologies. By strategically wielding the power of the public purse, we can encourage these companies to raise the bar for corporate citizenship, too.
President Joe Biden has already used executive action to require federal contractors to pay their employees a minimum of $15 per hour. A recently introduced House bill would go much further to ensure that taxpayer dollars are used wisely to encourage a range of high-road business practices.
Sick leave, fair pay, bargaining rights
The Patriotic Corporations Act, championed by Illinois Democrat Rep. Jan Schakowsky and backed by the 90-member Congressional Progressive Caucus, includes a long list of provisions aimed at lifting up American workers and reducing economic inequality. For instance, contractors would have to grant a week of family leave and another week of paid sick-leave so employees don’t have to risk infecting their co-workers.
The bill would also give extra points in bidding contests to companies that meet certain equity benchmarks, such as having a gap between their CEO and median worker pay of no more than 100 to 1. Encouraging contractors to reduce internal disparities would help ensure taxpayer value, since research indicates that companies perform better when they have narrower pay gaps.
Companies could also get a leg up in the procurement process if they have corporate executive C-suites that are at least 40% women and people of color and allow worker representatives on their boards. Unionized companies, where employees have the chance to bargain collectively for a fair share of rewards, would also get preferential treatment.
The Patriotic Corporations Act also seeks to reward responsible stewards of our natural resources. A track record of environmental violations would be a disqualifier for taxpayer-funded contracts.
No tax havens
Companies that use tax havens and other accounting tricks to stiff Uncle Sam would also have a harder time winning taxpayer support. Three profitable corporations that ranked among the top 100 federal contractors of 2020—Booz Allen Hamilton
—paid zero federal taxes last year, according to the Institute on Taxation and Economic Policy.
We should be looking for new ways to unify and heal our crisis-torn populace. Rather than subsidizing corporations that widen our economic and social divides, every federal contract dollar should encourage business practices that make our nation stronger, more equitable, and resilient in the face of future crises.
Sarah Anderson directs the Global Economy Project and co-edits Inequality.org at the Institute for Policy Studies. She’s the lead author of the IPS report Pandemic Pay Plunder: Low-Wage Workers Lost Hours, Jobs, and Lives. Their Employers Bent the Rules—To Pump up CEO Paychecks.