A $2 trillion coronavirus relief package passed by Congress — and set to be signed into law by President Donald Trump on Friday — aims to rescue distressed corporations and workers alike. But a lesser-known provision that limits executive pay at companies that receive government assistance has stoked some opposition from pro-worker groups fearful the package tips too far in favor of big business.
Progressive organizations and labor unions criticized pay limits in the coronavirus relief measure they consider too lax while an economist at the conservative-leaning think tank American Enterprise Institute said the targeted but temporary compensation restrictions could be appropriate.
“We’re in an unprecedented crisis,” says Sarah Anderson, who directs the Global Economy Project at the progressive-leaning Institute for Policy Studies. “It’s not acceptable for executives to take a teeny tiny haircut here, while other people face absolute financial ruin.”
The stimulus package, passed by the GOP-controlled Senate on Wednesday and the Democrat-controlled House took on Friday, prevents company employees who made over $425,000 last year from getting a raise until at least a year after the loan is repaid. Moreover, executives who made over $3 million will face a reduction in pay, though they will still be able to make millions under the provision.
The final vote on the bill came in the wake of data released on Thursday of a record 3.283 million jobless claims made last week.
Waleed Shahid, communications director for progressive political organization Justice Democrats, called the executive pay limit measure “an absolute disgrace.”
“The executive compensation limits are nowhere near far enough,” Shahid told Yahoo Finance. “Some of the richest people in America will still receive millions in compensation.”
Chief executives at S&P 500 companies on average received $14.5 million in total compensation in 2018, according to the latest data from the AFL-CIO. Delta (DAL) CEO Edward Bastian received about $15 million in total compensation last year, while American Airlines (AAL) CEO Doug Parker took in nearly $12 million in 2018.
Bastian announced earlier in March that he would go without salary for six months. A number of other CEOs have opted to take pay cuts, including airline executives like United (UAL) CEO Oscar Munoz and Southwest (LUV) CEO Gary Kelly, as reported by Yahoo Finance Senior Writer Ethan Wolff-Mann.
The number of confirmed coronavirus cases, as of Friday, rose to more than 97,000 in the U.S., as the worldwide total surpassed 585,000, according to Johns Hopkins University. The number of people diagnosed with the disease in the U.S. has grown dramatically since March 1, when there were roughly 100 confirmed cases.
The $2 trillion stimulus bill includes $500 billion in loans for distressed companies, one-time checks of $1,200 for many Americans, and an expansion of unemployment benefits for laid off workers.
Under the stimulus bill, an executive who makes over $3 million would see any compensation beyond the figure get cut in half, meaning for example that an executive who made $13 million would instead receive only $8 million, resulting from the slash in pay beyond $3 million.
Stan Veuger, an economist and resident scholar at the conservative-leaning American Enterprise Institute, said he was neutral toward the pay restrictions but that they “aren’t crazy.”
“All these restrictions are temporary,” he adds. “We’re doing very specific bailouts for very specific companies. That’s the part of the legislation where the restrictions are the tightest.”
The debate over compensation paid by companies that receive government assistance traces back to the uproar over bonuses paid to bankers in the wake of the Great Recession. At nine of the largest financial firms that received loans during the Great Recession, about 5,000 bankers and traders received bonuses of $1 million or more, according to a report released in 2009 by then-New York Attorney General Andrew Cuomo, who’s now governor.
D. Taylor, international president of the 300,000-member hospitality union UNITE HERE, which expects more than 90% of its members to lose work due to the coronavirus outbreak, applauded the provision for limiting executive pay at all, but said CEOs at companies that receive government loans should forego their entire salaries, as some CEOs have chosen to do.
“Every executive is doing pretty well, while frontline people are getting crushed,” Taylor says.
The coronavirus relief measure includes greater accountability than the stimulus passed during the Great Recession, Taylor said.
“Do I think it’s an improvement? Yes,” Taylor says. “But this crisis is far worse than the Great Recession.”