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COLUMN LEFT / SARAH ANDERSON and JOHN CAVANAGH

Living Well at Workers' Expense : The top three executives at the firms studied each earned, on average, more than $2.6 million.

May 14, 1995|Sarah Anderson and John Cavanagh | Sarah Anderson and John Cavanagh are fellows at the Institute for Policy Studies in Washington and co-authors of a new study on the wage gap between executives and their workers. and

Mexico's currency crisis has created a windfall for U.S. companies that produce goods in Mexico for the U.S. market. Since they sell their products for dollars while paying their workers in highly devalued pesos, one Washington-based trade expert has described running a factory in Mexico now as "like running a mint."

Meanwhile, the peso crisis has meant more suffering for Mexican workers, whose already weak buying power has dropped by as much as 50% because of the jump in prices for staples.

U.S. corporations have largely resisted pressure from Mexican unions, socially responsible investors and other groups to provide raises to their Mexican workers that would make up for the drop in purchasing power, arguing that paying higher wages would diminish their competitive edge or contribute to higher inflation in Mexico.

Such excuses are hard to swallow when you consider that the executives at these firms had no problem accepting whopping raises for themselves over the past year. Based on just-released salary data, our analysis of the 26 U.S. companies with 1,500 or more employees in Mexico shows that the top three executives of each firm enjoyed raises in salary and bonus averaging 30% in 1994. At Ford and General Motors, two of the largest U.S. employers in Mexico, top executives received raises between 130% and 320%.

If you look at total compensation packages, which include the value of stock options exercised, the figures are even more staggering. The top three executives at the 26 firms each earned, on average, more than $2.6 million.

A common argument for fat CEO salaries is that you need to pay well to attract top-notch corporate leaders. However, executives at the largest Japanese firms earned much less--a still hefty $411,200 on average last year. If the U.S. executives in our study had limited their compensation to that amount, the rest of their earnings would have been enough to give each of their Mexican workers a $1,000 raise per year. Since most of their Mexican employees are now earning the equivalent of $1,000 to $3,000 per year, this would amount to a raise of 33% to 100%.

In at least one case, the CEO's compensation was worth far more than the company's entire annual Mexican payroll. Allied Signal CEO Lawrence Bossidy took home $12.4 million last year, while the company's 3,800 Mexican employees combined made an estimated $7.8 million.

At Ford, CEO Alexander Trotman made more than 2,000 times the annual pay of an average Ford employee in Mexico. Trotman's 1994 compensation package was $8.1 million, while the average Ford employee in Mexico made just over $4,000. Ford has about 10,000 workers in its Mexican border assembly plants.

Zenith CEO Jerry Pearlman made only $1 million last year, a rather miserly sum relative to the deals awarded to many other executives. However, the gulf between Pearlman and his Mexican employees is just as vast. Seventy-five percent (or about 20,000) of Zenith's work force is now in Mexico, where the company is notorious for its rock-bottom wages. A March 21, 1995, pay stub from one Zenith employee in Mexico showed he was making less than 50 cents an hour.

The wage gap between American executives and their American workers is also widening. While the executives were enjoying their raises, real wages for American workers continued to stagnate in 1994.

Moreover, the 26 companies in the study have carried out layoffs in at least 18 U.S. plants since the North American Free Trade Agreement took effect on Jan. 1, 1994. These figures come from the Department of Labor program that provides retraining and other benefits to workers who have lost their jobs as a result of the agreement. The program is investigating three additional petitions for such assistance among the 26 firms.

Advocates of the free trade pact argued that it would spur exports and drive up wages in Mexico. Independent Mexican unions joined with U.S. unions in countering that workers can obtain higher wages only if they are guaranteed basic worker rights. The past year has proved the workers right, and it is not too late to change course.

NAFTA should be put back on the negotiating table and a strong, enforceable provision to protect and enhance worker rights should be included. Further, as discussions begin on the inclusion of Chile in NAFTA, the workers' rights should be at the top of the negotiating list.

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