Netflix, Tesla & more | The U.S. companies spending more on executive compensation than federal tax

The U.S. companies spending more on executive compensation than federal tax

Ford, Tesla, and Netflix are among those named in a report detailing America’s largest companies that spend more on executive remuneration than on federal tax payments.

The report, from Analysis by Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS), identifies 35 firms whose senior executives earned more in compensation than the employers spent on net tax bills between 2018 and 2022.

A further 29 firms paid more to their top five executives in at least two of the five years in that period.

Ford Motor, for example, spent $355million on executive pay over the five years but only $121million on tax payments. Netflix’s tax bill for the period was $236million but it spent $652million on executive compensation. Staggeringly, Tesla, for spent $2.5 billion on executive pay, and received $1million in tax refunds.

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The total compensation for the named executive officers, usually including the CEO and CFO alongside other executives, at the 35 companies totaled $9.5billion.

Meanwhile, federal income tax payments amounted to negative $1.8billion, meaning as a cohort the group received more in government funds than they paid in taxes.

The 18 companies that paid $0 in federal income tax spent $3.5billion on executive compensation.

Among the 35 firms named in the report are American International Group (AIG), AT&T, Darden Restaurants, Duke Energy, FirstEnergy, Ford Motor, General Motors, Match Group, Met Life, Netflix, Next EraEnergy, Office Depot, Salesforce, Tesla, and T-Mobile US.

Is executive compensation out of control?

The report notes a rapid widening in the gap between average CEO and worker pay, increasing from 21 to one in 1965 to 344 to one in 2022, criticizing the “pay for performance” plans (including stock options and awards) that compensation teams use to justify eye-watering remuneration for top executives.

The ATF and IPS argue that performance-based executive compensation models, which pay out equity grants each year, reward top executives for making decisions such as job cuts that boost short-term share value.

America’s largest corporations, according to the report, have also benefited from a change in legislation that permits company stock buybacks, allowing them to boost the value of paychecks for top executives.

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A final explanation from the two bodies for the widening CEO and worker pay gap relates to America’s tax system, which permits companies to set up tax-deferred compensation accounts for top executives with no limit on annual contributions – a luxury not afforded to ordinary employees enrolled in a 401(k).

The report advocates for companies, amid reforms that are making small dents, to take matters into their own hands. “All workers make important contributions to their companies and our economy and we would all be better off if the rewards from hard work were shared more equitably,” it says.

Research from the ATF and IPS indicates that when corporate tax burdens drop, the CEO-worker pay gap rises.

Some of the companies named have responded to the report. Speaking to the Guardian, A Netflix spokesman said the company “complies with tax laws and regulations in the US and around the world,” and a Match Group spokesperson said, “the numbers here are not representative of our business.”

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