It’s been a central argument for the United Auto Workers union: If Detroit’s three automakers raised CEO pay by 40% over the past four years, workers should get similar raises.
UAW President Shawn Fain has repeatedly cited the figure, contrasting it with the 6% pay raises autoworkers have received since their last contract in 2019. He opened negotiations with a demand for a similar 40% wage increase over four years, along with the return of pensions and cost of living increases. The UAW has since lowered its demand to a 36% wage increase but the two sides remain far apart in contract talks, triggering a strike.
Fain’s focus on CEO pay is part of a growing trend of emboldened labor unions citing the wealth gap between workers and the top bosses to bolster demand for better pay and working conditions. In June, Netflix shareholders rejected executive pay packages in a nonbinding vote, just days after the Writers Guild of America wrote letters urging investors to vote against the pay proposals, saying it would be inappropriate amid Hollywood’s ongoing strike by writers. The WGA wrote similar letters targeting the executive pay at Comcast and NBCUniversal.
Fain has pushed back against arguments that a big pay bump for the union would jack up costs of vehicles and put the Big Three automakers — General Motors, Ford and Stellantis (formerly Chrysler) — at a disadvantage against foreign competitors with lower-cost workforces in the race to transition to electric vehicles.
“The reason we ask for 40% pay increases is because in the last four years alone, the CEO pay went up 40%. They’re already millionaires,” Fain told CBS’ “Face the Nation” on Sunday. “Our demands are just. We’re asking for our fair share in this economy and the fruits of our labor.”
CEO pay has ballooned for decades, while wages for ordinary workers have lagged. But did the Big Three chief executives really get 40% pay increases? Not exactly.
“I don’t know where the 40% came from,” said General Motors CEO Mary Barra at a new conference when asked if the UAW’s numbers were accurate.
Executive pay is notoriously complicated to calculate because so much of it comes in the form of stock grants or stock options. A detailed look at the compensation packages at all three companies shows how the UAW’s claim both overstates and understates reality, depending on the view.
The Big Three CEO pay packages
Barra, the only one of the three who held the role since 2019, is the highest paid, with a compensation package of worth $28.98 million in 2022. The single biggest component was $14.62 million in stock grants, which vest over three years and whose ultimate value depends on stock performance and other metrics.
Her pay has increased 34% since 2019, according data from public filings analyzed for AP by Equilar.
Ford CEO James Farley received nearly $21 million in total compensation in 2022, a 21% increase over the $17.4 million then-CEO Jim Hackett received in 2019, according to the company’s proxy statements. Farley’s package last year included $15.14 million in stock awards, which also vest over three years with an ultimate value dependent on performance.
Where the the comparison gets complicated is at Stellantis, which was formed in 2021 with the merger of Italian-American conglomerate Fiat Chrysler Automobiles and French PSA Group. Because it is a European company, the way Stellantis discloses executive pay differs significantly from GM and Ford.
In its annual renumeration report, Stellantis reported CEO Carlos Tavares’ 2022 pay was 23.46 million euros. That’s a nearly 77% increase over then Fiat Chrysler CEO Mike Manley’s 2019 pay of 13.28 million euros.
Those are the numbers used by the UAW when it calculated that three automakers have, collectively, increased CEO pay by 40.1% since 2019, according to the methodology the union provided to The AP.
But there’s a catch: Stellantis’ figures reflect “realized pay,” which include the value of previously granted equity that vested during the reporting year. U.S. companies, in contrast, use grant date value of stock packages awarded to executives during the reporting year.
In its analysis, Equilar used the “grant date” method to make an equivalent comparison between all three CEOs. By that measure, Tavares’ 2022 compensation was in 21.95 million euros in 2022, including 10.9 million in stock awards with a three-year vesting period.
That’s actually 24% decline from Manley’s compensation package in 2019, which was 29.04 million euros, according to Equilar.
The volatility of CEO pay
So, is Tavares really making less than Manley was four years ago? Not really.
That’s because in some years, talking about a CEO’s “realized pay” can obscure exorbitant pay packages approved by company boards.
Take Tavares’ 2021 compensation package, which included special incentive award of 25 million euros in cash as well as stock worth 19.56 million euros — all contingent on long-term performance goals — granted to Tavares in recognition of “his essential role” in leading the company through the merger.
That one-time award, which came on top of millions of more in regular compensation, alone pushed Tavares’ 2021 compensation package far above what Manley got in 2019.
Stellantis shareholders voted 52.1% to reject the pay proposal in their annual meeting, though the vote was only advisory and the board approved his package anyway.
The CEOs of GM and Ford also saw their compensation packages peak in 2021, before declining slightly in 2022.
How does all this compare to regular worker pay?
However you slice the numbers, the gap between CEO pay and rank-and-file workers at all three companies is gigantic.
At GM, the median worker pay was $80,034 in 2022. It would take that worker 362 years to make Barra’s annual compensation.
At Ford, where the media pay $74, 691, it would take 281 years.
At Stellantis, with a median pay of 64,328 euros, it would take 365 years, although the company noted its its annual report that the disparity includes expenses related to Tavares’ one-time grant. Excluding that, the pay ratio is 298-1.
How extreme that disparity? It depends on the comparison.
It’s far above the typical pay gap at S&P 500 companies, which was 186-1 according to AP’s annual CEO pay survey, which uses data analyzed by Equilar.
And it’s astronomical by historical standards. According to a study of the 350 largest publicly traded U.S. firms by the left-leaning Economic Policy Institute, the CEO-to-Worker pay ratio was just 15-1 in 1965.
The automakers, for their part, emphasize that their foreign competitors pay their workers much less. Including benefits, workers at the Detroit 3 automakers receive around $60 an hour, according to Harry Katz, a labor professor at Cornell University. At foreign-based automakers with U.S. factories, the compensation is about $40 to $45.
Then there’s Tesla.
CEO Elon Musk’s 2022 compensation was reported as zero in the company’s proxy statement, rendering its official pay ratio meaningless. Of course, that’s because Tesla hasn’t awarded Musk new packages since a 2018 long-term compensation plan that could potentially be worth more than $50 billion and is facing a legal challenge from shareholders.
But the proxy offers glimpse at the mind-boggling wealth disparity between its nonunion workers and one of the world’s richest men.
The filing reported Musk’s total “realized compensation” in 2021 at more than $737 million. A typical Tesla worker earned $40,723 that year.
According to the proxy, for that worker to make Musk’s “realized compensation” that year, it would take more than 18,000 years.