'Undercover Boss' Salaries: When Equality Disappears

Every week, CBS's (CBS) popular show Undercover Boss features a business executive fumbling his way through a much lower-echelon job. The message tends to be redemptive: As the suit in question gets to know a few underlings and explores the company from a worm's-eye level, he inevitably emerges a better, more knowledgeable person. The basic theme of the show is that, beyond the perks and the big office, there really isn't that much separating people on the bottom and the top of a company.

While heart-warming, this lesson doesn't extend to paychecks. According to data released by the AFL-CIO, the average CEO in 2009 made 263 times as much as the average worker in his or her company, which means that these business leaders made more money on their first day of work than their average workers made all year. By comparison, the average CEO in 1980 made 42 times as much as the average worker.

Income Disparities on Undercover Boss

This certainly plays out on Undercover Boss, where most of the executives make over $1 million per year. For example, GSI Commerce (GSIC) CEO Michael G. Rubin, who appeared in the first season of the show, brought home more than $2.3 million in 2009. By comparison, the average customer service representative at his company makes $10.16 per hour, or just over $20,000 per year. Rubin's fumbling enthusiasm as a customer service rep was fun to watch, but a certain pathos sets in when one realizes the patient co-worker who tutored the CEO through his mistakes brings home less than 1% of his boss's yearly wage.

The ratio between Rubin and his lowest-paid workers is about average. With stock options included, Chris McCann, the president of 1-800-Flowers (FLWS), makes $1,311,031, or about 100 times the salary of a customer service rep at his company. The same goes for Great Wolf Lodge (WOLF), where the average call center employee makes about 1.1% of the $1.7 million that goes to CEO Kimberly K. Schaefer. And Michael White, CEO of DirecTV (DTV), brought home about $1.5 million in 2009, 100 times the average salary of a DirecTV customer service representative.

CEOs Paid More...For Quitting

CEOs often make more than their workers -- even when they stop working. For example, when Lawrence O'Donnell III, CEO of Waste Management (WM) left the company earlier this year, he took home a severance package of $1.6 million, almost 50 times the yearly salary of the average garbage truck driver at his company.

These salary comparisons, while striking, are only part of the issue. In addition to high pay and attractive golden parachutes, many execs are paid to serve on the boards of other companies, receive lucrative stock options and have other sources of income. For example, O'Donnell's contract at Waste Management included a host of sweet perks, including annual bonuses of up to 120% of his yearly salary, stock benefits, four weeks of paid vacation, a hefty car allowance, country club memberships, and thousands of dollars in financial planning services. Even beyond his impressive paycheck -- and golden parachute -- O'Donnell's compensation package paints a picture of an executive who lives in a world far-removed from Waste Management's rank-and-file.

Chiquita's Boss Doesn't Go Undercover in Colombia

The most egregious income disparity is at Chiquita (CQB), the massive fruit company. With a $7.6 million paycheck, CEO Fernando Aguirre ranks as Undercover Boss's highest-paid executive. While it's difficult to determine the salaries of the unskilled migrant workers that he worked alongside, a higher-echelon production manager job at the company pays $56,000 per year, or 0.7% of Aguirre's salary.

But that's only half the story. The bananas that have made Chiquita famous aren't grown in the U.S. Rather, they are produced in Latin America, where Chiquita's business practices are notorious. In 2004, workers in Honduras demanded a 75% wage increase from $4.91 to $8.60 per day. While the cost of living in Latin America is significantly lower than in the U.S., Chiquita's wages are still not enough to support its workers. As Human Rights Watch noted in 2002, many families have to put their children to work to put food on the table. At Chiquita, the report noted, kids were paid $3.50 per day, or less than one-8,000th of Aguirre's salary. In other words, Aguirre makes more money in 14 minutes than an 8-year-old banana picker makes in a year.

This isn't to say that Chiquita doesn't give money to people in Latin America. In 2007, the U.S. Department of Justice investigated the company for its donations to FARC, AUC and ELN, three Colombian rebel and paramilitary groups that were later cited as terrorist organizations. Ultimately, Chiquita admitted to giving $1.7 million to AUC, and agreed to pay a $25 million fine. Under the circumstances, it's not surprising that Undercover Boss didn't send Aguirre to work in Columbia: The country has asked the U.S. government to extradite some of the company's executives so they can stand trial.

Income Disparity -- And Its Effects

In the grand scheme of things, the income disparity of the companies on Undercover Boss tends to be fairly low. By comparison, Walmart CEO Michael Duke -- who brings home $35 million per year -- makes more in an hour than an average new Walmart employee makes in a year. One effect of this income disparity is that many companies are understaffed, or filled with underskilled employees. As John DeFeo noted in The Street, reducing CEO/worker pay ratios to 1980 levels would enable the average company to hire 277 workers, a move that would go a long way toward reducing unemployment and improving service quality.

Massive income disparity may also contribute toward worker mistreatment. In a recent paper, academics from Harvard, Utah and Rice universities claimed that "higher income inequality between executives and ordinary workers results in executives perceiving themselves as all-powerful...leading them to maltreat rank and file workers." According to the authors, archival data and laboratory experimentation have shown that high incomes, combined with distance between the execs and their employees, lead to the impression that workers are "dispensable objects not worthy of human dignity."

One message of Undercover Boss is that closer contact between workers and executives may encourage better relationships across companies. But as long as massive income disparities continue, workers and bosses in search of respectful, productive relationships will face an uphill battle.

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Elisa Jed

I am glad people are trying to figure out this problem. There are ways companies try to fix it. I think the biggest thing is having people double check each other.

Elisa Jed | http://www.londriganlaw.com/trucking-accidents.html

March 19 2014 at 9:54 PM Report abuse rate up rate down Reply
Eliza Winters

You have some really interesting information on here. I was recently hired at a new company to handle some of their accounting. the more i try to get some of the information from the president of the company he tends to push back as if he does not want me accessing the information. It is hard for me to handle accounting when I cannot access the information. What should I do? Would you hire a business attorney? ( http://www.fabianlaw.com/practice/Employment )

August 25 2011 at 1:59 PM Report abuse rate up rate down Reply

Interesting anyone thinks a CEO started their companies. Very few companies are/were started by the current CEO and the few that were have a management staff that couldn't stand together on the deck of ANY mammoth cruise ship. Ridiculous financial rewards aren't helping our country grow stronger, instead they're showing how prideful ugly Americans are when the kid picking our bananas has NO chance to afford the niceties we take for granted. When politics, cronyism, and nepotism are more important than service, production, quality, and experience. I enjoy how stupid the boss looks trying to do the work. Irony would be when he tries it every day after living the life his employees can afford. We're living the life of UGLY AMERICANS, but it won't end quietly....unfortunately...

December 13 2010 at 10:57 PM Report abuse rate up rate down Reply

I don't hear anyone in here saying they shouldn't make more, dmartinlaw. But if you think for example Kenneth Ley made the big bucks for working harder or being smarter, you are an idiot. He made the big bucks for Bush's help cheating California out of billions of dollars by manipulatng the energy market. Try to catch the credits at the end of "Fun with Dick and Jane" with Jim Carrey to refresh your memory on how many CEOs who were no better than crooks got HUGE compensation packages. Don't you know, it is about who has the power more than it about who works harder or is smarter.

December 09 2010 at 5:57 PM Report abuse rate up rate down Reply

Well said Pat. For anyone here arguing that CEOs deserve MILLIONS of $ per year in compensation, I just wonder, do you think there is EVER a point where they are paid more than they are worth (whie they choose the board of directors who set compensation diretly or indirectly) and if so how much would that be?

December 09 2010 at 5:50 PM Report abuse rate up rate down Reply

The day the common worker has to put at risk as much as the CEO does, while possessing the same intelligence, determination and savvy to run the company as does the boss, is the day they get to make as much money - maybe not in the same company but certainly in one they themselves build. No one forces the banana picker to pick (at least not in the USA) or the customer service worker to serve or the floor cleaner to clean - they do so because someone is willing to pay them a wage that they accept in return for their services. All these lamentation of unfairness ignore the fairness of permitting one to earn whatever one can - even if doing so is in part upon the labor of others. How many CEOs or bosses started as CEO? Very few. Most start somewhere at the bottom answering to someone at the top who made a whole bunch more money than they did at the time; and what motivated the success? Certainly not an opportunity to be paid the same as the lower level worker.

December 08 2010 at 7:18 PM Report abuse rate up rate down Reply

Since we want to be dealing in facts here, there is a clarification that ought to be made. Chiquita does not grow or pick bananas in Central America or... anywhere. They are a distributor and marketer. So, the people who are picking the fruit are paid by whoever owns the plantation. Chiquita simply negotiates a box price, has the product loaded onto a ship (also not theirs), and delivers it to a port in whatever country they are marketing the fruit with their label. This does not justify the CEO's or anyone's salary. But, at least we should be dealing in facts and be using fair comparisons.

December 08 2010 at 4:08 PM Report abuse rate up rate down Reply

Although I enjoy the show Undecover Boss, yesterday's episode was disturbing. The CEO offered a month with pay and travel expenses to his employee's son therapy in a European country instead of offering health plan that he could use here the USA. Perhaps if closed down his tennis court which neither he or his wife seem to be using the monies might be utilized to benefit his employees.Please remember all that you earn during your lifetime will remain on earth, not if heaven is your goal.

December 06 2010 at 9:46 AM Report abuse rate up rate down Reply

Hey piv2442. I am sure Abraham Lincoln said "weakening" not weaking. Applying the Lincoln quote to the huge disparity between the wages of CEOs and the wages of the peons in their companies is a misuse of it. In Lincoln's day there were no multinational corporations whose executives have more power than the leader's of most countries. As the article points out, there are negative effects from the huge disparity of income that corporate CEOs have been able to create for themselves because they choose the Boards of Directors of the corporations and the Boards of Directors choose the compensation committees. The result of this "you scratch my back, I'll scratch yours" merry-go-round is the obscene bonuses and perks we have seen executives reward themselves with for decades. Anyone who thinks these people are deserving of the compensation they award themselves is not paying attention. I do not pretend to know what Abraham Lincoln would think about today's world and I don't think anyone else does, either.

December 05 2010 at 6:09 AM Report abuse rate up rate down Reply
1 reply to Pat's comment

Pat, may it be suggested that you focus too much attention on the few instances of immoral and illegal conduct. Fiduciary duty rules apply to corporate officers and directors and those who violate that standard should be rebuked, but to suggest the famous Lincoln quote does not apply to this discussion only illustrates the failure to understand the principal argument: Wealth does not follow the law of thermodynamics, for it is both created and destroyed. Success and wealth are not finite particles; you do not need to take from me to equalize the available wealth, you need only to create your own and we are then both wealthy.

December 08 2010 at 7:37 PM Report abuse rate up rate down Reply

The elitism of Ronald Reagan's trickle down theory of economics can be seen in present day attitudes of the Tea Party and its adherents. It may ultimately be the downfall of this country as the middle class disappears and we become a two-class country, the rich and the poor. Shades of 14th century England!

December 05 2010 at 5:58 AM Report abuse +1 rate up rate down Reply
2 replies to Pat's comment

Couldn't agree more! QEII has turned "trickle down" into "trickle/flooding away as money poors overseas. http://www.dailyfinance.com/story/record-corporate-profits-are-coming-out-of-workers-hides/19730686/

December 07 2010 at 4:33 PM Report abuse rate up rate down Reply

It's not elitism to perceive the American worker as capable of achieving whatever he or she dreams of, and once the dream is acheived to permit that worker to keep the fruits of his labor. It is petty jealousy and and a denial of basic human traits that lead one to believe taking from one to give to another is fair. there is no danger to the middle class except from the class warfare which would leave all but the crony's of the ruling class in poverty with no way to escape except by favor of the government. How exactly does the socialist think economies grow and prosper where there is not profit motive?

December 08 2010 at 7:23 PM Report abuse rate up rate down Reply