A Twitter acquaintance read my Saturday post on Capital One’s closure of its Sioux Falls operation and accused me of belittling the 750 South Dakota workers Capital One is laying off.
Permit me to redirect:
As Capital One CEO Richard Fairbank (wait a minute: a credit card boss named Fairbank? oh, the irony!) reduces the pay of 750 Sioux Falls workers to zero, I notice that his annual compensation in 2014 was $19.6 million. He took no salary, but a mere 1% of his stock, options, and bonus could repay the taxpayers of South Dakota for the $200K in corporate welfare we handed the company in 2011.
Let Fairbank keep his $4.4-million bonus, and he could still write each of his 750 Sioux Falls employees a $20,000 check for the value they create for Capital One. At $4.4 million, he’d still be making more than five of the six South Dakota CEOs the AFL-CIO lists in calculating our state’s average CEO pay of $2.23 million. In 2014, Fairbank made 543 times the average South Dakota worker’s wages. In other words, he convinced his board that his exertions added as much value to the company as the exertions of nearly three quarters of the people working for Capital One in Sioux Falls.
And now Fairbank has apparently taken the position that the exertions of all 750 Capital One Sioux Falls employees are not worth any paycheck.
Tell me again: who’s belittling Capital One’s soon-to-be-erstwhile Sioux Falls workers?
Related Reading: The Economic Policy Institute finds that the compensation for top CEOs nationwide was 303 times typical workers’ annual compensation in 2014. EPI says this astronomical pay doesn’t add value, and taxing that wealth wouldn’t harm value:
That CEO pay grew far faster than pay of the top 0.1 percent of wage earners indicates that CEO compensation growth does not simply reflect the increased value of highly paid professionals in a competitive race for skills (the “market for talent”), but rather reflects the presence of substantial “rents” embedded in executive pay (meaning CEO pay does not reflect greater productivity of executives but rather the power of CEOs to extract concessions). Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment [Lawrence Mishal and Alyssa Davis, “Top CEOs Make 300 Times More than Typical Workers,” Economic Policy Institute, 2015.06.21].