As shareholders prepare for annual meetings, the fast-food industry has the greatest CEO-to-worker pay disparity in our economy, with ratios exceeding 1,000-to-1, according to a new study released by Demos. The study finds soaring executive compensation and stagnant wages for front-line workers in the fast food industry drives inequality, as well as threatens economic growth and shareholder investment.
For sake of comparison, a fast food restaurant worker earns about $19,000 a year (assuming the worker is full time and earns $9 an hour). Meanwhile, the average CEO of a fast food restaurant chain pulls in $23.8 million a year - more than $11,400 an hour.
Other key findings of the study include:
The report also points to the serious costs for the economy overall and for individual fast food firms, including long-term performance corrosion due to disinvestment in human capital and legal risks brought on by renewed scrutiny for the industry’s pay practices and working conditions.
“Rising pay inequality has dire consequences for workers in New York City and beyond,” said Scott M. Stringer, New York City Comptroller. “As a fiduciary, I am also concerned with the impact of pay disparity on the City’s pension funds, which have long recognized that excessive pay disparities pose a risk to shareowner value. Demos’s report is an important guide to the implications of this issue in the fast food industry, where the CEO-to-worker pay disparity is particularly acute.”
“The fast food industry is leading the trend of pay disparity in the US, and the negative consequences are surfacing as operational issues, legal challenges, and diminishing worker and customer satisfaction,” said Catherine Ruetschlin, Demos Policy Analyst and author of the report. “Even the industry leader McDonald’s has acknowledged that rising inequality is a risk to their bottom line. These performance issues can manifest in reduced shareholder returns, but the problems extend beyond fast food to the rest of the economy. It is important for shareholders, executives, and workers that companies address the practices that drive income inequality at both the top and bottom halves of the CEO-to-worker ratio and lead to misallocated resources and a widening gap.”
While the repercussions of income inequality have drawn the attention of consumers and policy makers, companies have yet to reconcile the issue. Fast Food Failure argues that companies need to do more in order to arrest the damage from pay disparity and restore the focus on long-term interests of the firm.