In the ongoing battle for wage parity, the United Auto Workers union has leveraged a potent argument: if Detroit’s Big Three automakers – General Motors, Ford and Stellantis (formerly Chrysler) – can afford to hike CEO pay by 40% over the past four years, then similar raises should be extended to workers. UAW President, Shawn Fain, has consistently highlighted this discrepancy, contrasting it with the meager 6% wage increase for auto workers since their last contract in 2019. Fain’s wage hike demand of 40% over four years, along with the reinstatement of pensions and cost of living increases, has been a sticking point in contract negotiations, leading to a strike.

Fain’s focus on CEO pay is emblematic of a broader trend of labor unions leveraging the wealth gap between workers and top executives to advocate for better pay and working conditions. This strategy has seen some recent success, as evidenced in June when Netflix shareholders, swayed by arguments presented by the Writers Guild of America, rejected executive pay packages in a nonbinding vote. However, the question remains: Did the Big Three really award their CEOs a 40% pay increase? A closer look at the compensation packages of these companies reveals a more complex picture.

The Wage Gap Battle: Auto Workers Union vs Automakers’ CEOs

In recent years, the United Auto Workers (UAW) union has been making a strong case for wage parity, arguing that if Detroit’s three automakers can increase CEO pay by 40% over the past four years, workers should receive similar raises. UAW President Shawn Fain has been at the forefront of this argument, demanding a 40% wage increase over four years for autoworkers, the return of pensions, and cost of living increases. However, despite reducing the demand to a 36% wage increase, talks remain in limbo, leading to a labor strike.

CEO Pay vs Autoworker Wages

Fain’s campaign against the growing wealth gap between workers and top-level executives is part of a larger trend of labor unions becoming more vocal about pay inequality. His arguments are supported by several instances where executive pay has come under scrutiny, such as when Netflix shareholders voted against executive pay packages, and the Writers Guild of America’s protest against executive pay at Comcast and NBCUniversal.

Fain has dismissed claims that a significant pay increase for the union would lead to higher vehicle costs and put the Big Three automakers—General Motors, Ford, and Stellantis—at a disadvantage against lower-cost foreign competitors in the electric vehicles race. He argues that even as vehicle prices have surged by 30% over the last four years, autoworkers’ wages have seen a mere 6% increase.

Dissecting the CEO Pay Packages

The UAW’s claims about CEO pay have been met with skepticism, with CEO pay being a complex calculation involving stock grants or stock options. A detailed analysis of the compensation packages at all three companies shows that the UAW’s claim both overstates and understates reality, depending on the perspective.

For instance, Mary Barra, CEO of General Motors, who has held the role since 2019, saw her pay increase by 34% since 2019, according to data analyzed by Equilar. On the other hand, Carlos Tavares, CEO of Stellantis, saw a 77% increase in his pay package in comparison to former Fiat Chrysler CEO Mike Manley’s 2019 pay. However, a closer look reveals that Tavares’ compensation for 2022 was actually a 24% decline from Manley’s package in 2019.

The Chasm between CEO Pay and Worker Wages

Regardless of how the numbers are interpreted, the gap between CEO pay and the income of rank-and-file workers at all three companies is staggering. For instance, at GM, the median worker would need 362 years to equal Barra’s annual compensation. The situation is similar at Ford and Stellantis, where it would take the median worker 281 years and 365 years respectively to match the CEOs’ annual pay.

To put this in perspective, the CEO-to-Worker pay ratio at the largest publicly traded U.S. firms was just 15-1 in 1965, according to a study by the Economic Policy Institute. Today, the pay gap at S&P 500 companies stands at 186-1.

Final Thoughts

The wage gap battle between the UAW and the automakers’ CEOs highlights the growing concern over income inequality in the corporate world. The astronomical disparity between executive and worker pay is a contentious issue that is prompting labor unions to demand fair compensation. However, as negotiations continue, the question remains whether these demands will lead to meaningful change in the wage structure of the auto industry.