Fast Food Giants Gorge on Subsidies

Thanks to a loophole that subsidizes CEO pay, McDonald’s, Yum Brands, Wendy’s, Burger King, Domino’s, and Dunkin’ Brands trimmed $64 million from their tax bills in 2011 and 2012.

By Sarah Anderson

Sarah Anderson

The fast food industry is notorious for handing out lean paychecks to their burger flippers and fat ones to their CEOs. What’s less well-known is that taxpayers are actually subsidizing fast food incomes at both the bottom — and top — of the industry.

Take, for example, Yum Brands, which operates the Taco Bell, KFC, and Pizza Hut chains. Wages for the corporation’s nearly 380,000 U.S. workers are so low that many of them have to turn to taxpayer-funded anti-poverty programs just to get by. The National Employment Law Project estimates that Yum Brands’ workers draw nearly $650 million in Medicaid and other public assistance annually.

Meanwhile, at the top end of the company’s pay ladder, CEO David Novak pocketed $94 million over the years 2011 and 2012 in stock options gains, bonuses and other so-called “performance pay.” That was a nice windfall for him, but a big burden for the rest of us taxpayers.

Under the current tax code, corporations can deduct unlimited amounts of such “performance pay” from their federal income taxes. In other words, the more corporations pay their CEO, the lower their tax burden. Novak’s $94 million payout, for example, lowered Yum’s IRS bill by $33 million. Guess who makes up the difference?

fast food ceos

My new Institute for Policy Studies report calculates the cost to taxpayers of this “performance pay” loophole at all of the top six publicly held fast food chains — McDonald’s, Yum, Wendy’s, Burger King, Domino’s, and Dunkin’ Brands.

Combined, these firms’ CEOs pocketed more than $183 million in fully deductible “performance pay” in 2011 and 2012, lowering their companies’ IRS bills by an estimated $64 million. To put that figure in perspective, it would be enough to cover the average cost of food stamps for 40,000 American families for a year.

After Yum, McDonald’s received the second-largest government handout for their executive pay. James Skinner, as CEO in 2011 and the first half of 2012, pocketed $31 million in exercised stock options and other fully deductible “performance pay.” Incoming CEO Donald Thompson took in $10 million in performance pay in his first six months on the job. Skinner and Thompson’s combined performance pay translates into a $14 million taxpayer subsidy for McDonald’s.

What makes all this even more galling is that these fast food giants are pocketing massive taxpayer subsidies for their CEO pay while fighting to keep their workers’ wages at rock bottom. All of the big fast food corporations are members of the National Restaurant Association, which is aggressively working to block a raise in the federal minimum wage to a level that would let millions of fast food workers make ends meet without public support.

There’s an easy solution to the perverse “performance pay” loophole. A bill introduced by Senators Jack Reed (D-RI) and Richard Blumenthal (D-CT) would simply set a firm $1 million cap for executive pay deductions — with no exceptions. Corporations could still pay their CEOs whatever they choose, but at least taxpayers wouldn’t be subsidizing anything above $1 million. The Joint Committee on Taxation estimates this legislation would generate more than $50 billion over 10 years.

It makes no sense for employees of highly profitable giant corporations to have to rely on government assistance for basic needs. It makes even less sense for ordinary taxpayers to subsidize the CEOs who are benefiting most from the fast food industry’s low-road business model.

With Congress again mulling deficit-reduction strategies, it’s high time that Washington stopped letting fast food giants gorge on both of these absurd subsidies.


Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is the author of the new report Fast Food CEOs Rake in Taxpayer-Funded Pay. IPS-dc.org
Distributed via OtherWords (OtherWords.org)

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House GOP Gives Runaway CEO Pay Gets a Free Pass

The House Financial Services Committee has just moved to repeal the only statutory provision now on the books that puts real heat on overpaid top executives.

— by Sam Pizzigati

Sam Pizzigati

Only 10% of Americans now have confidence in Congress, Gallup informs us. No other major American institution has ever had an approval rating this low.

But public confidence in Congress would probably sink even lower if average Americans knew more about what our lawmakers are actually doing. The latest case in point: the steady progress of H.R. 1135, the “Burdensome Data Collection Relief Act.”

This particular piece of legislation speaks to an ongoing frustration in America’s body politic: CEO pay. Most Americans think corporate executives are grabbing far too much compensation.

Not the members of the House Financial Services Committee. By a 36-21 margin, they’ve just voted to repeal the only statutory provision now on the books that puts real heat on overpaid CEOs. The full House, observers expect, will shortly endorse this repeal.

The specific provision 31 Republicans and five Democrats voted to overturn — section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act — imposes a new disclosure mandate on corporations.

Under Dodd-Frank, as enacted into law, major companies must annually reveal the ratio between what they pay their CEOs and what they pay their median — most typical — workers.

Pizzigati-Congress-arcticpenguinCorporate pay reformers consider this ratio to be crucial information for reining in executive excess. If Americans could see — and compare — the exact CEO-worker pay ratio from one corporation to another, the reformers believe, the resulting negative publicity on the corporations with the widest pay gaps might just discourage excessive future executive compensation.

And if corporations ignored this negative publicity, Dodd-Frank’s disclosure mandate could serve as a stepping stone to tougher reforms. Lawmakers could, for instance, set a specific CEO-worker pay multiple as the nation’s preferred corporate compensation standard and deny tax breaks — or government contracts — to corporations that pay execs above that standard.

Pay ratio disclosure clearly has the potential to help extinguish what one Forbes analyst calls “the out of control wildfire” that executive pay has become. But the mandate hasn’t so far extinguished anything.

Corporate lobbyists have seen to that. They’ve been pressuring the Securities and Exchange Commission, the federal agency that must issue regulations before any new mandate over corporate behavior can be enforced. The agency has so far issued no regulations on CEO-worker pay disclosure. And nearly three years have gone by since Dodd-Frank initially worked its way into law.

America’s corporate leaders, meanwhile, don’t want to have to rely solely on their ability to intimidate the SEC. They’ve also orchestrated a congressional drive to simply repeal the Dodd-Frank pay disclosure mandate outright.

How can lawmakers who carry Corporate America’s water possibly defend repealing a measure as common-sense as pay ratio disclosure? Easy. They simply paint corporations as the victims of overzealous government bureaucrats out to drown them in burdensome — and meaningless — paperwork.

These repealers are doing their best to trivialize Dodd-Frank’s pay ratio mandate. Today CEO-worker pay disclosure, joked House Financial Services chair Jeb Hensarling (R-TX) in one recent debate — tomorrow a mandate that companies calculate the ratio of healthy to unhealthy drinks in company soda machines.

“I assume,” Hensarling smirked, “there is an infinite number of ratios some investors would find helpful to their decisions.”

Serious business analysts see executive-worker pay ratios as anything but trivial. Peter Drucker, the father of modern management science, believed that any corporations that had executives making over 20 or 25 times worker pay are placing employee morale and productivity at risk.

A host of public interest groups, organized in Americans for Financial Reform, also make a similar case for pay gap disclosure.

To sum this all up, the Dodd-Frank law’s section 953(b) was duly enacted into law, then ignored and never enforced, and now stands in jeopardy of getting repealed into oblivion. What can we learn from the sad, still-unfolding tale?

Maybe this: In a democracy, elected leaders represent the people. In a plutocracy, like ours, elected leaders represent the people — and listen to the rich.


OtherWords columnist Sam Pizzigati is an Institute for Policy Studies associate fellow. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class.  OtherWords.org  Photo credit to arcticpenguin/Flickr

NV Energy Execs Out of Control

by Erin Neff, Executive Director, ProgressNow-NV

NV Energy has a habit of getting what it wants. Last month the utility received approval to hike prices another 6 percent.

And why do we have to pay more for their dirty fossil fuel power? Because CEO Michael Yackira needed a 30 percent raise.

That’s right, the boss now makes $5.3 million a year.

And while the rest of us have lost jobs and homes or struggle to pay the power bill each month, NV Energy CEOs have raised your rates to raise their salaries.

The top 21 executives got 12 percent raises.

Lobbyist Tony Sanchez hauled in half a million last year. Lobbyist Judy Stokey got a quarter million. Spinmeister Rob Stillwell got $300K and Chief Financial Officer Dilek Samil got $760,000 last year.

Those numbers don’t add up in any year. But massive raises during a horrific recession is just plain arrogant.

Take action today. Speak out against NV Energy’s excessive CEO pay.

Share your story and make these 1 percent CEOs feel the heat from the rest of us.

Write a letter to the editor. It’s past time for NV Energy to stop getting what it wants.