Universities, Companies Address Income Inequality with Pay Caps

A group of students and faculty at St. Mary’s College in Maryland has put forward a new proposal that would tie the salary of the President to that of the cleaning staff. Currently, the interim president at St. Mary’s, Ian Newbould, makes roughly $325,000, or around 13 times that of the cleaning staff, who typically make $24,500 in a year.

President of St. Mary's College, Ian Newbould on the left. Photo courtesy of Ian Newbould/Facebook

President of St. Mary's College, Ian Newbould on the left.
Photo courtesy of Ian Newbould/Facebook

The proposal would cap the President's salary at ten times whatever the cleaning staff make, which would in this case be $245,000. The proposal’s goal is to address income inequality within the University. Many people argue that $24,500 is not a livable wage, and some on the cleaning staff at St. Mary’s have said that they have to rely on other forms of assistance in order to make ends meet.

While there are no other colleges or universities with a similar rule, the idea of tying the pay of the president to that of the average worker has been tried before.

Ben and Jerry’s had a rule in place that the CEO could only make five times what the average worker for the company made. However, once they sold the company in 1994, they removed this rule, as it made it difficult to attract new managers.

Photo courtesy of Ben & Jerry's/Facebook

Photo courtesy of Ben & Jerry's/Facebook

 

Whole Foods, another company with a pay cap, has increased its pay cap several times in order to retain executives.

Originally, the company’s executives could only make eight times the average pay, excluding stock options. Once the company went public in the 1990s, the cap was raised to 14 times.

In 2006, they raised the cap again, to 19 times what the average worker makes, or $607,800, saying that it was necessary to “help ensure the retention of our key leadership."

The difficulties Whole Foods and Ben and Jerry’s have had suggest that in today’s economy, a pay cap, while a seemingly reasonable step in addressing the growing wealth inequity, is hard to maintain in a profit-driven society.

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