Wage disparity has increasingly become a focal point within the auto manufacturing sector in the United States.
It’s become a common refrain for labor unions like the United Automobile Workers (UAW) to argue that if top executives in Detroit’s three auto heavyweights are taking home 40% raises, their labor force should benefit similarly.
Spiralling Tensions in Wage Discussions
Shawn Fain, the UAW president, has been centering his focus around this discrepancy in wages, indicating a widening income gap between laborers and top executives with a 34% contrast between executive and operative raises since the 2019 contract. Originally, trade union negotiations started with a demand for a parallel 40% increase in worker wages, bringing back pensions and cost of living increments. Cumulative discussions have resulted in a lower 36% increase proposal, but agreement is still distant, thereby stirring a strike.
Fain is combating the narrative that a significant pay hike for auto workers would result in a steep increase in vehicle costs, thereby putting auto giants — General Motors, Ford, and Stellantis — at a disadvantage against foreign competitors with more affordable labor force expenses in the race to transition to electric vehicles.
The Wage Disparity Issue
The argument for a 40% wage rise originates from the 40% raise in CEO remuneration within the last four years. The underlying principle factors in the already sizable wealth of CEOs, with the secular rise of executives’ wealth over the years while wages for ordinary workers have noticeably lagged behind. But do the figures correlate to a real 40% raise for the Big Three’s CEOs? The answer is not as simple as it might appear.
What’s in the Pay Package?
Calculating executive pay can be a convoluted process, as a substantial portion comprises stock grants or options. The compensation packages across the three major auto manufacturing firms show that the UAW’s claim, relative to CEO pay increase, both overstates and understates the issue depending on the perspective.
Compensation Breakdown for the Big Three
Mary Barra, the General Motors CEO, one of the triad still in the same capacity since 2019, has a highest recorded pay package worth $28.98 million in 2022 — her remuneration has seen a rise of 34% according to public data reviews. The biggest share of her package, $14.62 million, came as stock grants, vesting over three years with their value contingent on the financial performance of the firm.
Ford CEO, James Farley, experienced a 21% increase in total compensation in 2022 to reach nearly $21 million. His compensation included $15.14 million as stock awards, whose value is dependent on the future performance of the company.
Stellantis, the European conglomerate formed in 2021 from the merger of Fiat Chrysler Automobiles and the French PSA Group reveals a more complex scenario. CEO Carlos Tavares’ pay saw a significant 77% increase from 2019. However, Stellantis’ provided figures include “realized pay,” integrating the value of the previously granted equity that vested during the reporting year, thereby deviating from the accounting method used by American companies.
By accounting for these differences and using the “grant date” method in analysis, the comparison shows that Tavares’ pay package experienced a 24% decline from 29.04 million euros in 2019. So, while the quest for financial equality within the auto industry continues, the stark figures used in the argument seem to require a more nuanced understanding.
