Dock Workers Implement CEO Tactics to Earn Higher Compensation

In the wake of the gruesome murder of UnitedHealthcare CEO Brian Thompson, Wall Street’s single-minded focus on shareholder value and eye-popping increases in CEO compensation is getting new attention.

Few people know that UnitedHealth Group’s board of directors gave its former CEO, William McGuire, $1.6 billion in stock options over 15 years ($106 million a year), plus millions of dollars in salaries , bonuses and other forms of compensation. Unlike other businesses, health insurance companies generate shareholder value primarily from cost management.

The staggering rise in executive pay has fueled workers’ determination to cling to demands for better pay and benefits, even if it means leaving jobs and losing their paychecks.

The ILA wants something in return for helping the USMX increase the value of ports and ocean carriers, especially if technology decreases the need for new hires. Container shipping lines received a windfall during the coronavirus crisis when container rates soared from $2,500 to more than $12,000 per box. Companies like Maersk were able to finance many acquisitions and reward executives thanks to enormous corporate wealth creation.

Thanks to the Internet, workers and union leaders now have data on how CEOs have leveraged their position to obtain staggering compensation packages over several decades. In addition to salary and bonuses, CEOs get long-term pay, restricted stock options, and other benefits such as security reimbursements, tax preparation, and a car. Sometimes the value of the benefits is even increased to cover the CEO’s tax liability.

According to research by the Economic Policy Institute, since 1978, CEO compensation, adjusted for inflation, has soared 1,085% compared to just 24% for the typical worker. That equates to 24% annually for CEOs and a meager 0.5% annually for workers.

Other data sources show that the ratio of CEO compensation to the average salary of company employees is 300 times higher today, compared to 50 times 20 years ago.

In 2017, when President Donald Trump and Congress cut corporate taxes, top executives at public companies received billions of dollars in additional compensation even though their actions did not contribute to the rise in their stock prices.

The recent aircraft mechanics strike at Boeing, which lasted seven weeks, is a great example of how fed up workers paralyzed the world’s second-largest aerospace manufacturer. Ignoring demands for a 9.5% annual pay increase over four years resulted in a loss for Boeing of $10 billion, a 25% drop in the stock price, and a bond rating that was downgraded to a near-junk level before it raised $21 billion to shore up debt. balance.

It also illustrated that corporate leaders, rewarded with huge compensation for increasing shareholder value, failed to assemble a single aircraft for nearly two months and failed to protect the stock price from a 29% drop as the market in overall rose 9%.

While USMX agreed to provide a 61.5% pay increase over the next six years, or 10.25% annually, it still needs ILA approval to introduce more automation at ports to increase capacity and reduce labor cost.

For most dockworkers at the top end of the pay scale, a 10% increase could equal $10,000 a year. Compare that to a 10% increase in compensation for CEOs who make millions of dollars a year. The employee will spend that $10,000 on daily expenses for food, rent, transportation, vacations, and household needs, which circulates the money throughout the economy and back to corporations. CEOs invest their financial windfalls for future returns.

Fred Smith realized the importance of employees in creating shareholder value when he founded Federal Express in 1970 based on the PSP principle: people, service, profits. If the company takes care of its people (employees), they will provide excellent service (to customers) and that will generate profits (for shareholders). It was such a powerful concept that many corporations adopted it.

Over the past decades, PSP has been invested to represent profits, services and people. Corporate boards have adopted the mistaken belief that shareholders are the most important stakeholders. They don’t realize that of the three stakeholders, employees will show the most loyalty to the company. Shareholders have no loyalty to a company’s long-term mission. They will buy and sell shares at any time.

Corporate boards must recognize that rank-and-file workers are as important as management in creating shareholder value.

If the USMX wants to avoid a prolonged work stoppage, it needs to recognize the influence of the ILA and reward its members with the benefits gained through greater automation.

The failure of corporate boards to recognize the huge pay gap between CEOs and average workers will lead to greater unionization and more work stoppages that will harm shareholders, workers, customers, and the economy.

Through their aggressive bargaining stances, ILA workers and other unions, even now at StarbucksThey are sending a clear message that they are willing to leverage their collective shareholder value just as CEOs have been doing to achieve significantly greater increases in their total compensation.

Satish Jindel is president of ShipMatrix Inc., a freight forwarding and logistics consultancy. Jindel has 40 years of experience in the transportation industry and a track record of forecasting industry trends.