As executive compensation at big automakers soars, so does health care costs for the companies, workers

GM CEO Mary Barra, who was paid $29 million last year — hundreds of times more than the average GM worker — used a talking point over the weekend that I used to trot out every time a pesky reporter asked me to justify the unjustifiable: the outrageously high amount of money Cigna paid its CEO, especially when so many of our customers were struggling to cover the deductibles we made them pay before their coverage kicked in.

Barra, who along with the CEOs of two other big automakers is having to deal with striking workers who have received relatively meager wage increases over the past several years, defended her outsized compensation by saying that 90% of it is “performance-based.” 

Mary Barra, official portrait, Homeland Security Council. Barra was appointed to the U.S. Homeland Security Advisory Council by Secretary Alejandro Mayorkas in March 2022. 

I used that exact term countless times during my two decades as vice president of propaganda for two big health insurers, Cigna and Humana. (My precise title at Cigna when I left was VP of corporate communications.)

I would tell the media that the vast majority of the CEO’s pay was “at risk,” a term our lawyers and HR people suggested I use to persuade reporters and the public that the CEO and other top executives earned those millions, which was and continues to be paid primarily through stock grants and exercising stock options. Most of the pay of corporate executives these days is stock-based, which in addition to increasing the executives’ net worth every year also gives the companies and executives tax advantages. 

I would go on to talk about how big the company had grown and how challenging it is to lead the company in a highly competitive landscape. I’d point out that the CEO would have to meet a set of “performance metrics” determined by the board. And I would note that meeting customers’ needs and expectations was high on that list — and downplay the leading metric: meeting shareholders’ expectations. 

At almost all publicly traded companies in America, keeping shareholders happy is hands down the No. 1 “major job objective” for top executives, regardless of whether it is in writing and regardless of what their propagandists say. Don’t buy their spin. Wall Street runs the show — and Wall Street runs our health-care system.

The United Auto Workers union maintains that Detroit’s three big automakers raised CEO pay by 40% over the past four years while auto workers' pay since 2019 has increased just 6%. Did Barra and the CEOs of the other two auto giants meet their MJOs over that timeframe? A good argument could be made that they did not. GM’s stock price, for example, closed at $33.95 on Friday. A year ago, it was $32.53. As recently as Nov. 18, 2021, it was $63.40. 

But GM has been rewarding its shareholders — mostly big institutional investors — in other ways. GM authorized a stock dividend for 2022 that was 113.44% higher than the 2021 dividend. And last year it bought back $2.5 billion of its own shares, a gimmick, as I have written, that benefits shareholders — and top executives whose compensation is “risk-based” — by artificially increasing the value of each remaining share of common stock. So far this year, the company has already bought back nearly $2 billion of its own shares. 

A good argument could also be made that one of the reasons workers’ pay raises have been so paltry is that GM and other automakers are having to spend so much more money every year to cover the expense of health insurance for those workers. Insurers do a lousy job of controlling health-care costs, but they do a splendid job of raising the premiums and fees they charge their corporate customers. To keep those premiums and fees from going even higher, insurers have told those customers they need to shift more and more of their workers into high-deductible plans. As a result, workers every year have to pay more for health care out of their own pockets than they did the year before and the year before that. 

At GM and the other automakers, CEOs are now paid hundreds of times more than workers. Barra made 361 times the typical GM employee’s pay last year, according to Fortune. That’s not atypical, unfortunately. According to an analysis by the Economic Policy Institute (EPI), the CEO worker pay was just 15-1 in 1965. EPI also found that since 1978, the CEO compensation among America’s 300 biggest companies has gone up 1,460%, while the typical worker’s pay grew by just 18% (both adjusted for inflation). As for the big auto companies in particular, the Associated Press is reporting today that:

At GM, the median worker pay was $80,034 in 2022. It would take that worker 362 years to make Barra’s annual compensation. At Ford, where the median pay was $74,691 last year, it would take 281 years. At Stellantis [which owns Chrysler and Fiat and is based in Europe, and where the 2022 median pay] was $64,328 euros ($68,779), it would take 365 years.

The growing gap between CEO and worker pay is at the heart of most of the current labor disputes across the country, including in Hollywood and other cities where members of the Screen Actors Guild and Writers Guild of America are on strike against big entertainment corporations.

The gap between what U.S. companies pay their CEOs and average workers continues to widen, and health insurers continue to suck ever-increasing amounts of money from those companies that otherwise would be available to increase workers’ pay. 

As Warren Buffet said a few years ago, “GM is a health and benefits company with an auto company attached.” He and others have noted that GM spends more on health care than steel and that Starbucks spends more on health care than coffee beans. 

One has to wonder if one of Barra’s performance metrics should be to find ways to end the transfer of so much of GM’s revenues to Big Insurance — and her own bank account.