Sarah Anderson
RINF Alternative News
You might say the chieftains of
America’s largest restaurant corporations want it every which way and then some.
Having read the polls supporting a minimum wage hike, they’re
skittish about trashing the idea personally. So they pay their DC lobby
machine to do their dirty work. And it’s not enough for them to shove
the costs of their low-wage model onto Joe Schmo taxpayer. These CEOs
are also making the rest of us pay for their own fat paychecks.
How’s that again? Yes, ordinary taxpayers are not only covering the cost of
billions of dollars in public assistance for restaurant workers who earn poverty wages. We’re also subsidizing the pay of our nation’s notoriously overpaid CEOs.
Here’s how it works: Under the current tax code, corporations can
deduct no more than $1 million for executive pay from their federal
income taxes. But there’s a giant loophole that allows unlimited
deductions for “performance pay.” So, no surprise, what the big
corporations tend to do is put about $1 million of their executive pay
packages toward salary and call the rest “performance pay.” That way the
more they shovel into their CEO’s pockets, the less they pay Uncle Sam.
And the rest of us foot the bill.
A
new report I
co-authored at the Institute for Policy Studies explains how the 20
largest corporate members of the National Restaurant Association have
benefited from this loophole. These corporations aren’t necessarily
bigger exploiters than those in other sectors. But they deserve extra
scrutiny because of the high social costs of their low-wage model—and
because they’re fighting so hard to preserve it.
Nearly all of the big restaurant corporations are members of the
National Restaurant Association, which is leading the charge against
minimum wage increases.
1. Starbucks
In 2012 and 2013, Starbucks CEO Howard Schultz took in $1.5 million
per year in salary, which is subject to the $1 million deductibility
cap. But that was just the foam on top of a triple venti.
Now we get to the serious money. Schultz cashed in stock options
worth $230 million over this two-year period. For good measure, the
board tossed him $2 million-plus incentive bonuses each year. Both of
these types of compensation fall into the “performance pay” loophole.
So how much does Starbucks get to subtract from its tax bill for the cost of this one guy’s “performance pay”? $82 million.
That’s a lotta lattes.
Like several other big restaurant CEOs, Schultz has
taken a soft line on
the minimum wage. That is, when asked about it personally. Meanwhile,
Starbucks remains a member in good standing of the National Restaurant
Association, which is deploying dozens of lobbyists to block a wage
increase.
2. Yum! Brands
Next time you’re shelling out for a Gordita Supreme at Taco Bell,
keep in mind that you’re also contributing to a grande-sized paycheck
for the CEO of the chain’s parent company, Yum! Brands.
Yum! CEO David Novak took $67 million in “performance pay” over the
years 2012 and 2013, which lowered the firm’s federal tax bill by about
$23 million.
Low-level workers at Taco Bell and Yum!’s other chains (Pizza Hut and KFC) earn
less than $8 per hour on average.
Since that’s not a living wage anywhere in the United States, it’s no
surprise that many Yum! workers must rely on Medicaid or other
taxpayer-funded anti-poverty programs to make ends meet. The
National Employment Law Project estimates that Yum! employees receive nearly $650 million in public assistance annually.
In addition to the firm’s membership in the NRA, Yum! has also been active with the
American Legislative Exchange Council. In 2011, a Yum! official
co-led an ALEC task force focused
on blocking paid sick leave benefits. Rather than giving sick employees
a break, it seems they’d rather have them sneezing on your Gordita.
3. Chipotle
Chipotle has invested heavily in developing a progressive customer base by projecting
the image of a
“sustainable” fast food alternative. So it’s not surprising that the
firm’s top brass have shied away from speaking out personally against
the popular push to raise the minimum wage.
Co-CEO Monty Moran
has commented that
average wages at Chipotle are already $9 and so the effect of raising
the minimum to $10 would be “not too significant.” Like other
image-conscious CEOs, Moran appears to prefer to have his Washington
lobby shop, the NRA, handle the dirty work on this issue.
Moran is probably also reluctant to draw attention to his own
paycheck. The company has an extremely top-heavy pay structure in part
because it has two CEOs. In 2012, Moran cashed $55 million in stock
options and his co-CEO, Steve Ells, cashed in $47 million. In 2013, both
men received more than $20 million in vested performance stock and Ells
exercised another $42 million in options. Altogether, their 2012-2013
“performance pay” generated a CEO pay subsidy for Chipotle of $69
million.
4. Dunkin’ Brands
At the helm of Dunkin’ Donuts and Baskin Robbins, CEO Nigel Travis
cashed in on more than $20 million in stock options in both 2012 and
2013, generating a performance pay tax subsidy for the company of more
than $15 million. For comparison’s sake, that $15 million would be
enough to cover the cost of one public assistance program on which many
fast food workers rely, the Supplemental Nutrition Assistance Program,
for 9,608 households for a year.
Like the CEOs of Starbucks and Chipotle, Travis has taken a soft line on the minimum wage when speaking out personally. In one
recent interview,
he said, “We believe the minimum wage will go up. So there’s no point
fighting that.” Maybe there’s no point for Travis. He’s got the NRA to
do that job.
5. McDonald’s
In his first six months as CEO in 2012, CEO Donald Thompson took in
more than $10 million in “performance pay,” which translates into a $3.5
million subsidy for the company. Last year, Thompson’s haul was more
modest because he opted not to cash in any of his hundreds of thousands
of exercisable “in-the-money” stock options.
Faced with a wave of worker
protest
actions, he may have decided to hold off on a big payout until the
spotlight on the fast food giant is not quite so bright. On top of
growing demands for living wages, the company has also faced a spate of
wage theft charges. In 2013, the company settled a New York case for
$500,000 and workers in
two additional states recently
filed similar suits. Due to the company’s notoriously low wages,
McDonald’s workers rely on an estimated $1.2 billion in public
assistance per year, according to the
National Employment Law Project.
6. Darden
Among full-service restaurant chains, Darden has enjoyed the largest
CEO pay subsidy. The owner of Olive Garden, Red Lobster, LongHorn
Steakhouse, Bahama Breeze, and Capital Grille, Darden is the world’s
largest full-service restaurant company. In 2012 and 2013, CEO Clarence
Otis received nearly $9 million in fully deductible “performance pay,”
which works out to a more than $3 million taxpayer subsidy for the
company.
Darden pays at least
20 percent of
its U.S. employees only the federal minimum wage for tipped workers,
which has remained at $2.13 an hour for more than 20 years. Together
with the NRA, they’re lobbying hard to keep it that way.
The NRA will be among the targets of a
demonstration organized by several grassroots organizations on April 28 under the theme of “kicking corporate cash out of Congress.”
Restaurant Opportunities Centers United, which has built a network of
thousands of restaurant workers and high-road employers to improve
industry standards, is partnering with the National Domestic Workers
Alliance and National People’s Action to urge elected officials to put
the interests of regular people first. The following day, members of the
NRA will converge in Washington for a major lobby push against
increasing the minimum wage.
It’s time the big restaurant CEOs were called out on their paycheck
hypocrisy. For too long they’ve been sticking taxpayers with the bill
for their bad pay practices —at both the bottom and the top ends of the
corporate ladder.
Sarah Anderson
directs the Global Economy Project at the Institute for Policy Studies
and is a co-author of the Institute’s 20th anniversary Executive Excess
report, “Bailed Out, Booted, and Busted.”
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