Restaurant Industry Pay: Taxpayers’ Double Burden

Restaurant Industry Pay Report CoverMajor restaurant chains have come under increasing criticism for paying workers so little that they need to rely on public assistance. What’s less well known is that taxpayers are also subsidizing these corporations’ executive compensation.

This report calculates the cost of CEO pay subsidies at the 20 largest corporate members of the National Restaurant Association, a lobby group that is leading the charge to block minimum wage increases. Specifically, we calculate the cost of a loophole that allows corporations to deduct unlimited amounts from their income taxes for the cost of executive compensation — as long as the pay is in the form of stock options and other so-called “performance pay.” This loophole serves as a massive subsidy for excessive executive compensation.

Key report findings:

  • During the past two years, the CEOs of the 20 largest NRA members pocketed more than $662 million in fully deductible “performance pay,” lowering their companies’ IRS bills by an estimated $232 million. That would be enough to cover the cost of food stamps for more than 145,000 households for a year.
  • One NRA member —Starbucks— was off the charts. CEO Howard Schultz pocketed $236 million in exercised stock options and other “performance pay” over the 2012-2013 period. That translates into an $82 million taxpayer subsidy—enough to raise the pay for more than 30,000 baristas to $10.10 per hour for a year of full-time work.
  • The next four largest beneficiaries of the CEO pay subsidy are fast food corporations. Chipotle, Yum! Brands (owner of Taco Bell, KFC, and Pizza Hut), McDonald’s, and Dunkin’ Brands each raked in CEO pay subsidies ranging from $12 million to $68 million over the period.
  • Among full-service restaurants, the company that has enjoyed the largest CEO pay subsidy is Darden, the owner of Olive Garden, Red Lobster, and several other chains. CEO Clarence Otis took in nearly $9 million in fully deductible “performance pay” over the years 2012 and 2013. That works out to a more than $3 million taxpayer subsidy.

Download the full report [PDF].