Prices rise, and CEO profits (Analysis)

Oil CEOs blame Wall Street for high prices 1:11

New York (CNN Business) --

Inflation is taking a toll on everyone's pocketbook except CEOs.

Prices are rising almost everywhere, and businesses have been quick to blame those rises on the cost of doing business, with labor and material prices surging due to COVID-driven supply issues. 19 and the Russian invasion of Ukraine.

And while the wages of American workers rose 4% last year, the biggest increase since 2001, things are getting paid a lot more: When adjusted for inflation, wages and salaries fell 2.4%.

• CEO optimism dimmed due to war, inflation and covid-19

Meanwhile, CEOs are getting bloated with money.

In a way, we are responsible.

During the first year of the pandemic, CEO salaries rose 19%, even as many of their businesses ground to a halt, according to the Economic Policy Institute, a left-wing think tank.

CEOs are arguably more than up to speed on inflation.

Business profits have soared, and demand for goods and services has remained strong even as prices rise.

Frustration is mounting, however: Consumer sentiment plunged this month to its lowest level since 2011.

Executive pay is always top-notch, of course, but the difference now is that consumers have to shoulder it while top executives get richer and profit margins rise.

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Companies know they can get away with more price hikes, in part because the idea of ​​inflation has ingrained itself in the collective psyche of shoppers.

We expect to pay more, and we keep buying because our checks are a little higher.

But as prices continue to rise, "I think people are going to be amazed when they learn how CEOs actually benefit from, and take advantage of, it," said Sarah Anderson, program director of the Global Economy Project at Economic Policy. Institute.

• Inflation in the United States has no brake: a key index reached double digits in February

It pays to be rich

An oft-cited example is the case of Chipotle, which has increased prices to consumers by 10% in the past two years, even as profits have soared.

The chain's CEO, Brian Niccol, earned $38 million in 2020, 2,898 times more than the company's average employee.

(The most typical CEO-to-worker ratio last year was 350 to one.)

Chipotle representatives did not immediately respond to a request for comment, but a spokesperson told Newsweek last year that the bonuses and fringe benefits were "based on a competitive analysis of CEO pay levels within our peer group and It's designed to pay for performance.

Starbucks has also been singled out for jacking up prices even as its profit soared more than 30% last year.

Outgoing CEO Kevin Johnson also received a nearly 40% raise in salary from him, totaling more than $20 million, compared to a year earlier.

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A Starbucks representative tried to separate menu prices and executive compensation as "two completely different issues," noting that the latter is determined by the board of directors.

"Our executive compensation program is structured to closely align with our business purpose and commitment to creating shareholder value," the representative said in an emailed statement.

As for menu prices: "There are many factors that contribute to our thoughtful pricing strategy, which takes into account the growing 7% inflation rate, as well as wages, customer demand and other costs."

Company boards decide executive compensation, which is a mix of salary, bonuses and other benefits tied to various financial goals.

But these boards are often packed with executives or former executives from other companies that benefit from the system.

Critics of excessive executive compensation often point out that those shareholders are unlikely to rock the boat, especially at a time when profits are rising.

"Despite all research to the contrary, there is a belief that the man in the corner office is almost solely responsible for the value of the company," Anderson said.

"And so you have to do everything you can to keep him happy and make sure he doesn't go away."

Price increase