HOW SHE SEES IT Let's outsource CEOs instead of employees
By SARAH ANDERSON
KNIGHT RIDDER/TRIBUNE
This Labor Day, American workers are facing great uncertainty. As employers are shipping jobs to low-wage countries, U.S. workers are being left with pink slips while the bosses are padding their bank accounts.
Many corporate leaders claim that foreign outsourcing boosts efficiency, which then generates increased profits that will be used to support American jobs.
In reality, outsourcing firms appear to be channeling those profits not into U.S. jobs, but rather into the pockets of their chief executives.
CEOs at 50 leading service outsourcing firms got bigger raises and earned more on average than their peers at other leading U.S. firms, according to a study I co-authored for the Institute for Policy Studies and United for a Fair Economy.
The top outsourcing executives earned an average of $10.4 million last year, compared to the average of $8.1 million earned by U.S. CEOs as a whole. Outsourcers received pay raises of 46 percent -- five times as great as their peers, according to Business Week.
Slashing costs
The highest-paid of the outsourcers was George David, CEO of United Technologies. David's pay rose 630 percent -- to $70.4 million -- last year. After David set a strict target for slashing costs in 2001, the firm began rapidly replacing U.S. labor with less expensive Indian workers. The firm has software development centers in two Indian cities, as well as outsourcing contracts with five Indian vendors. David's goal is to send 80 percent of the company's software development and support to India, according to CIO Magazine.
Oracle CEO Lawrence Ellison has also been richly rewarded while outsourcing jobs to India. The software giant has announced plans to double the size of its research centers in two Indian cities, bringing its workforce to more than 6,000 employees in that country. Ellison raked in $40.6 million last year.
Bank of America CEO Kenneth Lewis came in close behind Ellison, earning $37.9 million in total compensation, while slashing nearly 5,000 U.S. jobs and outsourcing up to 1,100 jobs to India. The firm recently announced that it would cut an additional 12,500 American jobs in the next two years. As at many firms, the bank's American employees are given severance pay on the condition that they help train their replacements.
As U.S. corporations globalize their service workforces, the pay gap between workers and their bosses has grown even larger.
Pay differentials
The $10.4 million made by the average CEO at an outsourcing firm is 134 times the annual pay of an average U.S. computer programmer, and 400 times the annual pay of an average U.S. call center worker.
The divide is even more astounding between these bosses and Indian workers. The CEO pay is 3,348 times the annual pay of an average call center worker in India, and 1,306 times the pay of an average Indian computer programmer.
Given a lack of other economic opportunities, Indian workers are understandably often eager to secure new jobs catering to the U.S. market. However, in a largely unregulated global economy, these workers face the nagging fear that their jobs could quickly evaporate as soon as firms find lower costs elsewhere. And resentment among the Indian poor who have not benefited from outsourcing was a key factor in the defeat of their country's ruling party in recent elections.
The only clear winners from outsourcing are the U.S. executives who exact a huge cost on workers and communities.
We need to demand fair compensation for workers at home and abroad. And if belts need to be tightened, CEOs should begin by cinching in their own waists.
X Sarah Anderson is the director of the Global Economy Project at the Institute for Policy Studies in Washington, D.C., and a co-author of the new report "Executive Excess 2004," with United for a Fair Economy. Distributed by Knight Ridder/Tribune Information Services