AMC Networks booted its CEO after only 3 months, gave her a $10 million payout, and cut about 20% of its staff. So much for workers being empowered.
- The former AMC CEO Christina Spade got a $10 million payout after only three months on the job.
- CEO compensation has increased in recent years, while average worker wages decreased.
Three months on the job and a $10 million payout. Nice work if you can get it.
That kind of windfall is reserved for America's top CEOs, like Christina Spade, the outgoing head of AMC Networks, who resigned Tuesday after taking the reins in September and is receiving that multimillion-dollar package.
It's quite a different story for the rest of America's workforce. Case in point: Just as Spade collects her millions, AMC, which owns cable networks and streaming services, is expected to lay off 20% of its employees.
Spade is hardly alone in receiving a big payout. Disney pushed out CEO Bob Chapek in mid-November. He's likely to walk away with $23 million after less than three years in the top job. Now the company has put a hiring freeze in place, and workers are bracing for layoffs.
For years, the gap has been widening between what big-time CEOs rake in and what everyday workers take home. According to the AFL-CIO's annual Executive Paywatch Report, which has tracked CEO-to-worker pay ratios for more than two decades, S&P 500 CEOs averaged $18.3 million in compensation last year, which is roughly 324 times the median worker's pay.
The AFL-CIO report also showed that workers' real wages dropped 2.4% in 2021, after adjusting for inflation.
But what's especially galling is how the stratospheric size of CEO paychecks — and their severance packages — stands counter to the promises they've made. During the height of the pandemic, CEOs pledged to champion worker rights. They thanked their employees for working longer hours and, in some cases, risking their health to do their jobs. Around the same time, more than 180 CEOs signed a public letter declaring that businesses should have bigger goals than profits. And execs sounded the alarm on inequality in interviews and on social media.
AMC's former CEO getting a massive payout for three months of work is not good for shareholder capitalism or stakeholder capitalism.
Now, as recession fears loom, those promises are a distant memory. Spade and Chapek's windfalls underscore that stakeholder capitalism — the idea that businesses truly value their workers and consumers — is little more than cheap talk.
"This is a divide right now: Do CEOs maximize shareholder value or do they work for the greater good?" Michael Dambra, an associate professor of accounting and law at the University at Buffalo School of Management, said to Insider. "But AMC's former CEO getting a massive payout for three months of work is not good for shareholder capitalism or stakeholder capitalism.
"I can't imagine employees are going to be happy and I doubt the market will be happy either."
Layoffs versus the golden parachute
Research shows that CEO severance packages serve an important purpose in corporate America. Essentially, they reduce the CEO's financial risk, which is key when they take over a company where volatility is high and performance is lagging. "You get a contract that says, 'If it doesn't work out, you'll be made whole,'" Dambra said.
This, in turn, compels the CEO to take on more risk and be more innovative in their role, which is good for shareholders. "There is sense in having severance packages, but as the divide grows between what CEOs earn compared to the average rank-and-file, it becomes harder to argue that these contracts are fair," Dambra said.
I mean some of these payouts really seem obscene.
In 2021, the New York Times journalist David Gelles wrote that some of the same companies that laid off thousands of workers during the pandemic still paid their CEOs millions of dollars. He pointed to the compensation packages of CEOs at Norwegian Cruise Line, Hilton, and Boeing.
Shareholder support for US pay packages is at its lowest point since 2011, the year that "say on pay" votes were made mandatory, according to Equilar, a pay-data company. And some investor groups have recently proposed votes to curb CEO pay.
Meanwhile, roughly three-quarters of Americans say that most CEOs are compensated too much, according to a 2022 online poll of about 1,000 adults by the nonprofit research firm Just Capital.
But as workers face an uncertain economy, inflation, and an increasing number of hiring freezes and layoffs, CEOs will likely continue to rake in millions.
Anthony Nyberg, a professor of human resources at the Darla Moore School of Business at the University of South Carolina, told Insider that "it's possible that some of the macro things we're seeing in the economy — where employees are asserting their voices and unionizing at some of the biggest companies in America, like Starbucks and Amazon — could be viewed as a response to how these egregiously excessive pay and severance packages are perceived.
"I mean some of these payouts really seem obscene."
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