A recent poll shows that 87 percent of Americans view the growing gap between CEO and worker pay as a problem for the country. And yet ordinary U.S. taxpayers are fueling corporations with huge pay gaps through the hundreds of billions of dollars in federal contracts and subsidies that flow every year to for-profit businesses.
Earlier this year, the Institute for Policy Studies analyzed pay trends at the 300 publicly held U.S. corporations that had the lowest median wages in 2020. In this policy brief, we zero in on the 74 companies in this sample that received more than $1 million in federal contracts from FY2019 to May 1, 2022. Together, they held $37.2 billion in contracts during this period.
Key findings:
+ The gap between CEO and median pay at these 74 low-wage federal contractors increased from an average of 483 to 1 in 2020 to 599 to 1 in 2021. Only four of the firms had ratios of less than 100 to 1.
+ These contractors’ average CEOs compensation rose from $7.7 million in 2020 to $13.0 million last year.
+ Median pay among these firms averaged $26,838 in 2021, up from $23,107 in 2020.
+ Seventeen of the firms repurchased their own shares in 2021, with expenditures totaling $4.6 billion. Stock buybacks siphon artificially inflates the value of a company’s shares — and the value of their CEO’s stock-based pay.
The corporations in our low-wage sample with the largest federal contracts come from diverse service, technology, and manufacturing sectors.
Maximus
Maximus, the top contractor in our sample, has held $12.3 billion in federal contracts over recent years. The company’s contracts include deals to service federal student loans and operate Obamacare and Medicare call centers. In fiscal year 2021, federal contracts made up 45 percent of Maximus total revenue.
Half of the 49,800 Maximus employees earned less than $38,059 in 2021. Before President Biden’s executive order raising the minimum wage for federal contract employees to $15, many of the company’s call center workers earned as little as $10.95 per hour.
By contrast, Maximus CEO Bruce Caswell’s 2021 compensation totaled $7.9 million, 208 times the firm’s median pay and 36 times the salary of the top officials at the government agencies responsible for the company’s largest contracts.
Maximus offers a prime example of how extreme pay gaps undermine enterprise effectiveness. A March 2022 report by the Communications Workers of America and the Student Borrower Protection Center revealed extensive Maximus mismanagement. The study found evidence of sloppy and potentially unlawful student loan servicing, unfair debt collection practices, and unlawful wage garnishments and public benefit seizures, sometimes even involving Social Security payments.
In March and again in May 2022, workers at Maximus call centers in Mississippi and Louisiana, a largely Black workforce, staged walkouts demanding higher pay, paid sick leave, and the opportunity to unionize without retaliation. In June, over 40 workers from Maximus call centers in Mississippi, Louisiana, Virginia, and Texas marched to the company’s brand new, state-of-the-art headquarters in Tysons, Virginia, to deliver a petition with close to 12,000 signatures calling for livable wages, affordable health care, and the right to organize a union free from intimidation.
Amazon
Amazon, the second-largest contractor in our sample, has reported $10.3 billion in recent federal contracts, most of it to provide web services for the National Security Agency. But the full extent of Amazon’s taxpayer-funded contracts remains unknown. The company reportedly also received a lucrative share of a multi-billion-dollar CIA contract for cloud services. The details and exact value of this contract continue to be classified.
Amazon’s new CEO raked in compensation worth $212.7 million last year, 6,474 times the company’s median pay and 961 times the salary for the U.S. secretary of defense.
The company spent millions of dollars in 2021 fighting union campaigns at several of its warehouses, including one in New York’s Staten Island where workers voted in a union for the first time at a U.S. Amazon worksite. The retail goliath is fighting to overturn this union victory in court and has continued to use intimidation tactics to undermine union drives at other facilities.
TE Connectivity
TE Connectivity has landed $3.3 billion in recent federal contracts for manufacturing electronic sensors and connectors, partly under direct contract with the Defense Departments and partly as a subcontractor to major military contractors like Boeing, Lockheed Martin, and Northrop Grumman.
TE Connectivity CEO Terrence Curtin enjoyed a 39 percent 2021 pay increase to $14.7 million. The company’s median worker pay last year rose only 0.2 percent to $24,975, far below the U.S. inflation rate. Under Curtin’s leadership, TE Connectivity has expanded its global workforce while cutting U.S. jobs. In 2018, the firm’s 12,056 U.S. employees made up 16.8 percent of the company’s workforce. By 2021, TE’s U.S. worker total had shrunk to 9,169, just 12.5 percent of the overall workforce. The company operates 16 manufacturing facilities in China. They do not disclose where the median TE worker labors, but that person likely works outside the United States.
TE Connectivity has a notorious history of executive excess. The firm was originally part of Tyco International, whose CEO, Dennis Kozlowski, became infamous for the golden shower curtain and other extravagances he purchased with money stolen from the company. He was convicted in 2005 and sent to prison. TE Connectivity is also famous for tax-dodging, having moved its headquarters first to Bermuda and then to Switzerland to avoid paying its fair share of U.S. taxes.
