Capitalists Embrace Unions: A Call for Fairness in Pay
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Chapter 1: The Role of Unions in Today's Economy
In the corporate world, a CEO is essentially just another employee. So why are they compensated as if they own the company? Moreover, why aren't the rest of the workforce incentivized in a similar manner?
If you've been paying attention, you’re likely aware that the United Auto Workers (UAW) have initiated an unprecedented strike against all three major automakers in Detroit. The entertainment industry is also feeling the impact, as actors and writers are on strike. Meanwhile, UPS has just secured a landmark contract, narrowly avoiding its own strike, and Starbucks is reportedly fighting against unionization efforts, a battle that has persisted for years.
Across the United States, unions are experiencing a revival after decades of decline, gaining significant support even among those not directly involved in unions.
As a teacher and business owner, I find myself in a unique position. While my current venture isn’t large enough to require a union, I welcome the day it does, embracing the pro-union sentiment reflected in this discussion.
Management warrants union representation. This is a fundamental truth in the business world. Employees typically join unions not on a whim; they do so when they feel the need for protection from management—whether that be against hostile work environments, unsafe practices, or inadequate compensation and benefits.
Returning to the UAW, their demands include a 40% wage increase. The automakers have countered with a 20% offer. While 20% may seem appealing at first glance, we must ask: how fair is their current pay? What is the baseline for these increases?
Consider this: Mary Barra, CEO of General Motors, received a 40% pay increase last year, bringing her total compensation to $29 million. The CEOs of Stellantis and Ford earned $24 million and $20 million, respectively. It raises the question: should compensation for workers and CEOs be so drastically different?
CEO Compensation: A Growing Concern
What is happening with CEO pay? Despite my experience serving on boards and advising business leaders, this issue remains perplexing. When compensation committees convene, discussions about CEO pay often revolve around what executives could earn at competing firms.
Context is crucial. Corporate boards are frequently populated by CEOs from other companies, creating a vested interest in elevating peer compensation. If one board member has a high-performing leader, the tendency is to panic if they fear losing that talent to competitors, often leading to inflated pay.
Historically, the ratio of CEO pay to that of the average worker was about 20-to-1 in 1950, but today, that figure has ballooned to over 350-to-1. This disparity raises serious questions about the value of one employee compared to others in the organization.
The Wrong Questions
Boards should be asking themselves whether there are capable leaders within their companies who could be promoted to CEO, potentially earning a salary closer to twice that of their current positions rather than a lottery-like windfall.
Critics argue that the rise in CEO pay is justified by their performance, especially regarding stock value. It's true that the Dow Jones Industrial Average has seen significant growth, from just over $220 in 1950 to more than $34,000 today.
While it’s reasonable for investors to seek rising stock values, why isn’t this principle applied to all employees? If tying CEO pay to stock performance incentivizes better leadership, shouldn’t all workers share in the company’s success?
Workers are not joining unions and striking on a whim; they are doing so because they recognize a shifting balance of power in favor of labor, and they perceive the current situation as inequitable.
The reality is that while employees bear the brunt of downturns through layoffs, they often miss out on the rewards of company successes. This inequity is leading to justified strikes, as workers demand a fair share of the gains from their hard work.
The first video titled "How Unions CRUSH Capitalists" explores the dynamics of labor relations and the power of unions in a capitalist society.
The second video titled "Capitalism Is About Love (Jeffrey Tucker - Acton Institute)" discusses the ethical dimensions of capitalism and the role of compassion in economic systems.