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[Host]
You guys want to play a guessing game?
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You got snacks, it's cool.
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Hey, you guys want to play a guessing game?
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[Passerby]
I'm all right.
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[Host]
Okay!
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I wish I had some prizes.
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I’m at this Strawberry Festival in Ohio,
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and I’m asking a question that most Americans get wrong.
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The CEO of Lowe's, you know, the hardware store?
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Uh-huh.
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How much more do you think
he makes compared to the average
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Lowe's worker who is helping
you find the screwdrivers or whatever?
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Three times!
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Three times more?
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Three?
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Also three, okay.
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[Liz]
How much more do we
think the CEO of McDonald's made
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than his workers last year?
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I’m gonna say 90.
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The CEO of McDonald’s made
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1,212 times what his average worker made.
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557 times more.
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410 times more than the average Home Depot worker.
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Wow!
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[Liz]
Regardless of their politics,
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there's one thing that most Americans agree on:
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CEOs make way too much money.
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I'm a paycheck to paycheck woman,
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it's not fair.
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I'm a laundry lady. I make less than $15 an hour.
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I was a manager at McDonald's.
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Okay, so you've seen it from the inside?
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Yep, unfortunately, yeah.
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But it wasn't always this way.
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If you go back to even just the mid 1960s,
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CEOs were making about 20 times
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as much as their workers.
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Today, that ratio has exploded to 290 times more.
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So, what happened?
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This is the story of how the wealthy took
a weird corporate trick that used to be illegal
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and used it to supercharge their wealth
at the expense of their workers.
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And why this year,
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it could get way worse.
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Slap them for good luck.
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[Liz]
Felix Allen used to work at Lowe's Home
Improvement in New Orleans.
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I started at $12 an hour.
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Straight up, there had been people who were alive,
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you know, when Martin Luther King Jr. was
working on the Poor People's Campaign,
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working at our store, making less than $15 an hour.
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[Liz]
Those figures track with what most Lowe’s workers
make nationwide—about $33,000 a year.
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The company's CEO made 557 times more in 2023.
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[CEO]
And we’re gonna be great.
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One thing that became frustrating
pretty quickly was understaffing.
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Often there were too many customers
and not enough people in red vests.
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You know, it’s stressful.
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It wears on you.
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[Liz]
It's not just Lowe's.
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Workers at Home Depot, CVS and Starbucks
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also say that understaffing is endemic nationwide.
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But all these companies are super profitable.
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I mean, wouldn't it make sense for them to just
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have enough staff scheduled on the
floor to help their customers?
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That's just good business, right?
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Well, it used to be.
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Let's rewind back to 1979.
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That's when Lowe's graduated from a
single North Carolina hardware store
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to a nationwide chain
with a listing on the New York Stock Exchange.
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Back then, the CEO of a company like Lowe's basically
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had three options for what to do with their profits.
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They could put them back into the business—
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maybe open some new stores,
or invest in some fancy inventory software.
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They might use some of it to reward all of those
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new shareholders with a payment called a dividend.
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Maybe they use it to invest in their workers—
pay for them to learn a new skill,
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or at least hire enough of them at a high
enough wage to help their existing customers.
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Or maybe they do a little bit of all three.
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Remember this chart?
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This is the era that we're talking about.
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The gap between the average big company CEO
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and their typical worker was about 25 to 1.
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Corporations were largely reinvesting
in their innovation process
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and in some cases, because of strong unions,
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paying their workers living wages.
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But then, something shifted
in American corporate culture.
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It would eventually lead to the explosion
of CEO pay that we've seen since then.
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It was a complete revolution
in the way American companies were run.
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There’s a scene in the 1991
Danny DeVito movie, Other People's Money,
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that actually does a pretty good job
showing this new way of thinking.
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Make the stockholders richer!
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Are you gonna liquidate New England Wire and Cable?
And if so, what about the people who work here?
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[Liz]
Danny DeVito plays a corporate raider
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who is trying to convince
the shareholders of a small New England
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cable company to sell him their shares
so that they can cash out
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when he liquidates the company.
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[Danny DeVito]
You invested in a business, and this business is dead.
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Let's have the intelligence to sign the death certificate.
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Our employees, our community.
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What will happen to them?
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I got two words for that:
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Who cares?
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[Liz]
He tells the shareholders
that the company has done them wrong
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by not prioritizing their payouts.
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They sucked you dry.
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And our stock?
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One-sixth what it was 10 years ago.
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[Liz]
DeVito is styled as the kind of lovable
villain of this movie, but he actually represents
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a way of thinking that was taking over
American business at the time.
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[Lenore]
The way that we have thought
about the purpose of the corporation,
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since the Reagan Revolution, is to make
as much money as possible for shareholders.
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We’re going to turn the bull loose.
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[Lenore]
I refer to this as shareholder primacy.
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[Liz]
In the movie, the shareholders eventually
agree to sell to DeVito's character
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over the objections of the company's CEO.
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In real life, shareholders
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found a way to make sure that CEOs
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always put their interests above everybody else's.
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Instead of paying CEOs a salary in cash,
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like workers at the rest of the company,
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start paying them in company stock.
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The idea spread like wildfire.
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[Lenore]
Well, if one CEO starts to be paid in this new structure
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and you see their compensation go up very rapidly,
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that's going to spread
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very quickly across the entire ecosystem.
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It's like keeping up with the Joneses.
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[Liz]
Something else happened
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when CEOs started getting paid in company stock.
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And it goes a long way towards explaining
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why companies like Lowe's
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won't schedule enough workers to help customers
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or pay their employees like Felix a living wage.
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Remember those three options that Lowe's and other
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companies used to have for what to do with their profits?
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Well, in 1982, right before CEO
pay started to really take off,
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they added a fourth option:
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Buying shares of the company's stock.
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Here's how it works.
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Let's say each share of Lowe’s
stock sells for $100 on the open market.
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Then, the CEO of Lowe's
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decides to use some of the company's
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profits to buy back some of those shares.
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Now, all of a sudden, with fewer shares
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remaining, each share is worth a bunch more.
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Ta-Da!
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If this is reading to you like some kind of scammy,
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corporate magic trick...you're not wrong.
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For much of our history, stock buybacks were illegal.
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[Lenore]
The lawyers of big companies knew that a company
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could be accused of manipulating its market price
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if it went ahead and did stock buybacks.
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[Sarah]
That changed when Ronald Reagan was elected
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in 1980 on a platform of deregulation,
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and he picked a Wall Street
executive to be the head of the SEC.
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And that SEC chair decided that
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allowing stock buybacks would help
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companies that wanted to enrich their executives
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and their shareholders without really having to do
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anything to improve their performance.
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[Liz]
The Schoolhouse Rock theory of investing holds
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that in order for a company's stock price to go up,
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they have to actually do something.
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Like increasing their pollution.
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I mean—their sales!
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[Schoolhouse Rock Character]
Looks as if their sales are going up sky high!
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Better call my broker and tell him to buy.
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[Liz]
But with buybacks, corporations can raise
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their stock price without actually doing anything.
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I mean, just put yourself in the shoes of the Lowe’s CEO.
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Nearly 80% of your annual pay is in company stock,
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and you get a $3 million bonus
if the stock price hits a certain level.
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Your workers created nearly $7 billion in profits last year.
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What do you do with the money?
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Use it to make a bunch of your
part-time workers full-time,
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so they can help customers?
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Gotta pay the shareholders their dividends.
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Don't want to get fired.
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Use it to pay your employees a living wage
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so they stick with the company longer?
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Or, use it to do a massive stock buyback?
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Which literally makes the shares
that you own worth more
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and ensures that you get that $3 million bonus.
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Why wouldn’t they?
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If you put an incentive structure in place
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where CEOs legally manipulate
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the market price of the stock,
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that directly and indirectly affects
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their own compensation.
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Why wouldn't they?
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They can inflate their own paychecks
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without having to do anything
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to improve company performance.
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[Liz]
Stock buybacks are a huge reason
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why the pay gap between CEOs and their workers
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jumped in the 80s and 90s,
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and has stayed high ever since.
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[Lenore]
You've seen consistently companies like
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Lowe's or Walmart or Starbucks,
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where workers have been organizing.
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They have billions of dollars
going out the door in stock buybacks.
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They say they cannot afford to pay their workers
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even a very, very low basic wage.
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They're literally buying back their own stocks.
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I mean—it's hard for me to understand,
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but it's clear that if they're doing that,
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they got some coin to throw around.
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And they're getting paid
however many hundreds of dollars per hour.
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And yet, you know, my coworker who has worked
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at Lowe's for 20 years is making less than $15.
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I mean, it's, you know,
it's almost like laughable.
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It's obviously incredibly offensive.
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[Liz]
When companies started paying their CEOs in stock,
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it helped kickstart
a massive, nationwide transfer of wealth
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from workers to CEOs and shareholders.
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More recently, that wealth transfer has gone
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into overdrive thanks to one specific law.
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Another huge turning point was the 2017 tax reform.
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The biggest tax cut, biggest reform of all time.
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[Liz]
Now, as Trump and the Republicans are
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working overtime to make these tax cuts
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permanent in his “Big Beautiful Bill,”
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it's easy to see how it'll supercharge
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this wealth transfer from workers to CEOs,
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because we already have all the evidence.
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The biggest giveaway in that 2017 reform
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was the slashing of the corporate tax rate
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from 35% to 21%.
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This change gave corporations
a huge amount of cash to throw around.
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[Sarah]
Company leaders promised that they would use
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their windfalls from that tax cut
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and funnel it almost immediately
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into workers’ hands through wage increases and bonuses.
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Well, you're going to start
seeing a lot more money in your paycheck.
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Well, what happened after that bill was passed?
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A handful of companies gave some modest bonuses,
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but then that was it.
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Can you guess what they did instead?
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It’s not just a big year for earnings.
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You know, it’s a big year for
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buybacks are expected to hit a record $1 trillion this year.
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Companies announcing big share buyback programs
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along with their earnings reports.
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Of course, the irony of it being named
the Tax Cuts and Jobs Act
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is that very, very little of these savings
went to the workforce.
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You know, many people, including myself,
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were predicting that we would see buybacks as a main
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way that companies were utilizing the gains.
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But we saw it in levels that I didn't even expect.
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[Sarah]
It really changed the norm
for stock buybacks spending.
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When we did a big tax cut and when
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they took the money and did buybacks—
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that’s not building a hanger, that’s not buying aircraft,
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that’s not doing the kind of things that I want them to do.
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We didn’t think we would've had to restrict it
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because we thought they would have known better.
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Clearly they don't “know better.”
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And even if we take Trump at his word here
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that he didn't know companies were going
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to do all these buybacks with their tax savings,
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it raises a really important question:
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Why is he about to run the exact same play?
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Trump's "Big Beautiful Bill" gives corporations
another massive tax cut.
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But it doesn't put any limits on buybacks
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or tax them more aggressively.
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Which was something that one of his
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own cabinet members, Marco Rubio, floated back in 2019.
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We do want to create a preference
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for reinvesting it back into your business
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to increase productivity, innovation.
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And do you want to guess
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why Rubio's buybacks
tax isn't on the table this time around?
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Because days after he merely suggested it,
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Wall Street investors and their protectors
in Congress threw a proper little fit.
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One investment adviser told
CNBC it was part of a “war on wealth.”
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Another called it an “attack on
democracy” in a Financial Times op-ed.
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I’m not sure what the problem is we’re trying to solve here.
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Yes, there have been stock buybacks, too.
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I just don’t get this—
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the alarm over a perfectly normal,
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healthy aspect of a market economy.
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Legislators saying, “We know better how to deploy
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corporate capital than the managers in the business.”
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Fast forward six years and
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there is not one peep of buybacks
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opposition among Republicans.
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So, that's the story of how CEOs
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ransacked America's corporations
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and took everything for themselves.
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It used to be a literal crime.
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Now it's just business as usual.
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And it's no wonder that so many Americans feel that
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the politicians who let this happen
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aren't representing them.
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[Liz]
Do you all feel comfortable sharing who you voted
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for in the last presidential election?
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Didn’t vote.
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Didn’t like the choices.
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Didn’t vote.
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If you had a candidate that was running on
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a platform of capping CEO pay,
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would you have voted?
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Probably.
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Yeah, definitely.
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Yeah, let them know what it's like for us regular people.
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I didn't vote for a president.
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If there was a presidential candidate
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out here talking about capping CEO pay at,
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I think when you said like three, four, five times—
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Yeah.
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Would you support that candidate?
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Yes.
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It's not something that you hear
politicians talk about a lot.
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Right.
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Why do you think that is?
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Yeah, the big donors.
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A lot of previous politicians, their wives,
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their families,
that are all capitalizing off of this money.
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There's a whole lot of votes
out there available for purchase.
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But you think that, like regular folks,
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people who are working for a living—
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Like me and you?
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Yeah.
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Yeah, I would definitely vote for president like that.
