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Institute for Policy Studies

Report Info

  • Released May 1, 1997
Global Economy » Report

Executive Excess 1997: CEOs Gain From Massive Downsizing

The fourth annual CEO pay report finds that once again, CEOs win and workers lose.

In 1996, 30 firms announced U.S. layoffs of between 2,800 and 48,640 workers. Our analysis of these leading job-cutters reveals that their top executives, for the most part, were handsomely rewarded for wielding the axe.


1. Layoff Leaders Get Massive Compensation Hike: In 1996, the layoff leaders enjoyed an average increase in total direct compensation (including salary, bonus, and long-term compensation) of 67.3 percent—far above the average increase of 54 percent for executives at the top 365 U.S. firms. Most of the job-cutters’ increased earnings came in the form of gains from stock options, reflecting the continued trend on Wall Street to reward downsizers. In salary and bonuses, the layoff leaders received a 22 percent raise, which placed them far ahead of the average U.S. worker, who earned only a 3 percent raise in wages in 1996.

2. Enormous Wage Gap at Job-Cutting Firms: Of the 12 top job-cutting companies for which data were available, the average gap between the top executive’s salary and bonus (not including stock options) and the wage of the lowest-paid full-time worker was 178 to 1.

3. Efforts to Control Excessive Pay are Gaining Strength: A national coalition of community, labor, and business organizations is working to eliminate the massive loophole that presently allows corporations to deduct excessive salaries from their taxes. One proposed law, the Income Equity Act (H.R. 687), would prohibit corporate tax deductions on salary and bonuses that exceed 25 times the wage of a firm’s lowest-paid full-time worker. This “CEO Subsidy” costs U.S. taxpayers billions. Capping the deduction for only the top two executives at the 365 U.S. firms surveyed in Business Week would generate over $514 million in increased revenue.

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