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Demos

Fast Food Failure How CEO-to-Worker Pay Disparity Undermines the Industry and the Overall Economy Catherine Ruetschlin. Demos.org. There is a growing consensus about the negative consequences of inequality on economic growth and stability. .

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Demos

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  1. Fast Food Failure How CEO-to-Worker Pay Disparity Undermines the Industry and the Overall Economy Catherine Ruetschlin Demos.org

  2. There is a growing consensus about the negative consequences of inequality on economic growth and stability. • IMF (2014): Inequality is harmful for the level and duration of growth. • WEF (2014): Severe income disparity is a primary risk in 2014, leading to economic and political instability. • Piketty (2014): Inequality undermines productivity, growth, and success through merit. High executive incomes are unproductive rents.

  3. There is a growing consensus about the negative consequences of inequality on economic growth and stability. • McDonald’s (2014): Shareholder risks from inequality include • Adverse perceptions of the company brand; • Boycotts, strikes, and supply chain interruptions; • Increasing public focus on matters of income inequality and the need for higher wages; • Increasing public focus on workplace practices, conditions, and legal compliance.

  4. The CEO-To-Worker Compensation Ratio In Accommodation And Food Services Is Much Higher Than The Rest Of The Economy

  5. Accommodation And Food Services Had the Highest Pay Disparity During Seven Years from 2000-2012

  6. The CEO-To-Worker Compensation Ratio Is Highest In Fast Food

  7. CEO-to-Worker Compensation In Fast FoodComparedTo Select Sectors

  8. From 2000-2012 the Fast Food CEO-to-Worker Compensation Ratio Grew 470 Percent

  9. Fast Food CEO Compensation From 2000-2013

  10. CEO Compensation at YUM! Brands • Earnings Per Share declined by 9 percent. • A food safety scandal in the largest overseas market caused significant losses. • The company’s chief executive in China received $17.2 million in pay in 2013. The company determined that the China division had reached 172% of its system customer satisfaction target. • CEO compensation is set to “Motivate high performance and reward short-term Company, team and individual performance” and return shareholder value.

  11. Excessive Executive Pay and Misplaced Incentives Lead to the Misallocation of Financial, Real, and Human Capital(MihirDesai, Harvard Business Review 2012)

  12. Exposure to Operational, Legal, and Regulatory Risks • Increasing customer wait times • Decreasing order accuracy • Poor customer services ratings • Litigation and illegal pay practices • Worker Strikes • Deteriorating brand perception

  13. Broader Economic Effects of Pay Disparity • The most disparate industries are adding the most jobs to the economy. • Retail and fast food are top 5 occupations for projected job growth through 2022. • Increasing employment share leads to greater disparity economy-wide • Reinforces volatility and slow growth

  14. Demos.org

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