Michigan CEOs make more than employees by factors of hundreds, new report says

By: - July 27, 2022 3:05 pm

General Motors headquarters, Detroit | Susan J. Demas

Updated, 4:16 p.m., 7/28/22 with comments from Whirlpool

At least nine Michigan companies pay their CEO more than 100 times what their median worker earns, according to a recent report. 

The report was compiled by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), a federation of 57 national and international labor unions advocating for higher employee wages. 

Nationwide, CEOs of S&P 500 companies earned an average of $18.3 million in 2021, according to the report. CEO pay also outpaced the U.S. inflation rate of 7.1%, with CEO pay rising 18.2% last year.

Meanwhile, workers made an average of $58,260 in 2021. Their wages fell behind inflation, with wages rising 4.7% in the U.S.

“Working people experienced a pay cut with every price increase while U.S. companies enjoyed record profits and CEO pay increased at an even faster rate,” the AFL-CIO wrote.

Of the 11 Michigan-based companies listed, CEOs received an average of $16.2 million in 2021. Workers in those companies were paid a median of $64,003.

In nine of those companies, CEOs make more than 100 times what their median worker earns. Those companies were: Benton Harbor-based Whirlpool Corporation; BorgWarner, Inc. in Auburn Hills; Detroit’s General Motors Company; Ann Arbor-based Domino’s Pizza, Inc.; Ford Motor Company in Dearborn; Livonia’s Masco Corporation; Dow, Inc., which is headquartered in Midland; Kellogg Company in Battle Creek; and Stryker Corporation in Kalamazoo. 

Whirlpool Corporation had the highest wage gap between the CEO and its workers. Whirlpool CEO Marc Bitzer made more than $18.7 million in 2021, while workers earned a median salary of $27,128.

“Whirlpool Corporation’s executive compensation practices are largely performance based (90% for our CEO) and tied predominantly to the company’s long-term goals. 2021 was a year of macroeconomic volatility, including significant COVID-19 uncertainty, inflationary pressures and global supply chain disruptions that impacted our business, and most industries around the world. We took decisive actions to protect our employees and stakeholders and progress forward as a company. In the face of this uncertainty, we focused on actions to keep employees safe and plants operating. We finished the year with solid margins and a strong balance sheet,” said Chad Parks, senior manager of communications for Whirlpool Corp.

Mary Barra of General Motors was the highest paid CEO among the listed Michigan companies, with GM reporting Barra’s total compensation for 2021 at $29.1 million. GM employees earned a median of $69,433 that same year – or 420 times less than their CEO. 

In an email, Colleen Oberc, senior manager of sales and business communications at GM said 90% of CEO wages are tied to company performance measures, delivering “record performance” in 2021.

Employees shared in this success, Oberc said. Salaried and hourly U.S. employees were eligible for profit-sharing, with eligible hourly workers receiving up to $10,250 in profit-sharing. 

Following Barra, Dow, Inc. CEO James Fitterling ranked second in compensation, receiving more than $24.8 million in 2021, compared to the median employee $95,607.

Eighty percent of CEO salary is performance based, Dow, Inc. Corporate Media Relations Director Kyle Bandlow said in an email.

According to Dow, Inc.'s 2022 proxy statement, the company noted it maintains a “compensation peer group” which is used in setting executive and non-employee director pay. 

Dow targets the median compensation of other companies in its peer group for all elements including salaries, benefits and annual incentives, Bandlow said. 

Michelle Collins, Global Director of Marketing for BorgWarner Inc., an automotive supplier based in Auburn Hills, said CEO pay ratios can be misleading and are more representative of a company’s size, industry and geographic footprint than CEO compensation. 

The median employee at BorgWarner is based in Poland with a median salary of $31,740, and the CEO earns $17,592,090. This drives the company’s 554:1 pay ratio – meaning the CEO earns 554 times more than what it pays its median employees, Collins said. 

Compared to Aptiv, a similar sized company in terms of revenue, Aptiv has 155,000 employees versus BorgWarner’s 50,000. Aptiv’s median employee is based in Mexico, earning $7,402 versus the CEO’s $14,744,780, driving a pay ratio of 1,992-to-1, which the AFL-CIO report documents and Collins pointed out.

CEO pay ratio disclosure has been controversial since the practice was introduced through Dodd-Frank Financial Reform Act. When the practice of disclosing pay ratios was announced by the Securities and Exchange Commission in 2015, the Society for Human Resource Management noted the practice was popular with organized labor groups but unpopular with business advocates. 

In 2018, Harvard University Researcher Ethan Rouen found that companies with large gaps between CEO and employee pay could see their performance suffer. Rouen found firms with an abnormally high unexplained pay ratio suffered with their performance decreasing by as much as half, compared to their industry competitors with low levels of unexplained pay disparity.

In order to avoid losing workers, Rouen noted the importance of outlining the economic justifications of pay ratios to employees and investors, including factors like geography. 

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Kyle Davidson
Kyle Davidson

Kyle Davidson is a reporting intern for the Michigan Advance. A recent MSU graduate, Kyle studied journalism and political science. He has reported on community events, breaking news, state policy, and the environment for outlets including the Lansing State Journal, the Detroit Free Press and Capital News Service.

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