America’s Largest Low-Wage Employers: Which Companies Spend More on Stock Buybacks Than Capital Investments $ Employee Retirement Plans

A new report from the Institute for Policy Studies reveals that the CEOs of some of the largest companies employing low-wage workers in the US are prioritizing their own short-term gains over long-term investments. The report highlights that these companies are spending far more on stock buybacks than on capital investments or employee retirement plans.

From 2019 to 2023, the 100 lowest-paying employers in the S&P 500 — defined as those with the lowest median worker wages — spent a staggering $522 billion on stock buybacks. Leading this spending were Lowe’s and Home Depot, with Lowe’s buying back $42.6 billion worth of its own shares and Home Depot spending $37.2 billion over the period.

The report suggests that these funds could have been used differently. For example, Lowe’s could have provided each of its 285,000 employees with an annual bonus of $29,865 for five years, while Home Depot could have offered $16,071 bonuses annually to its 463,100 employees over the same period.

Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies and the report’s author, stated that the data shows CEOs are more interested in their short-term financial gains than in the long-term well-being of their employees or the overall health of their companies. She criticized the over $500 billion spent on stock buybacks as a “financial scam” designed to inflate CEO compensation while many workers face economic hardship.

The report found that 47 of these 100 companies spent more on stock buybacks than on capital improvements. For example, Johnson Controls spent $8.8 billion more on buybacks than on capital investments, while Analog Devices spent $6.2 billion more.

Additionally, 20 of the largest low-wage employers allocated nine times more money to stock buybacks than to employee retirement contributions over the past five years. AutoZone and Chipotle were particularly notable, with AutoZone spending 92 times more on buybacks than on retirement benefits and Chipotle spending 48 times more.

The report also pointed out that there is legislative action being considered in Congress to address these practices. Proposals include banning open-market stock buybacks, as was the case before the SEC’s 1982 rule change, and imposing taxes on such buybacks. There are also discussions on imposing restrictions on CEOs selling their shares after buybacks and increasing taxes on excessive CEO compensation.

A proposed SEC rule in 2023 aimed at enhancing transparency around stock buybacks was blocked after a lawsuit from the US Chamber of Commerce. The report also highlighted efforts by the Biden administration to use federal contracts and subsidies to reduce the pay gap between CEOs and workers.

Anderson noted that even when companies promote their matching contributions to employee retirement plans, it often means little to workers earning so little that they cannot afford to save. She highlighted that 92% of eligible Chipotle employees have a zero balance in their 401k plans.

Despite these issues, the gap between CEO and median worker pay has slightly narrowed, decreasing from 603:1 in 2022 to 538:1 in 2023, driven by a modest decrease in CEO compensation and a 9% rise in median worker pay among the top 100 low-wage employers, increasing from $31,672 to $34,522, not adjusted for inflation.

Ross Stores topped the list for the largest CEO-to-worker pay gap, with CEO Barbara Rentler earning $18.1 million in 2023, which is 2,100 times more than the median pay of $8,618 for a part-time retail associate at the company. Nike’s CEO, John Donahoe II, received the highest compensation among the CEOs listed, with a total package of $32.8 million in 2023, 975 times the median employee pay at Nike.

CEO compensation has seen a dramatic rise in recent decades, increasing by 1,209.2% from 1978 to 2022, compared to a mere 15.3% increase in median worker pay, according to a 2023 report from the Economic Policy Institute.

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