As President Obama lays out his tax plan for addressing income inequality in tonight’s State of the Union speech, in the first lady’s VIP box will sit a poster child for excessive CEO pay – Rhode Island resident and CVS CEO Larry Merlo.
“Last year, CVS Caremark President and CEO Larry Merlo announced that CVS would be the first major retail pharmacy to eliminate tobacco sales in all of its stores,” according to a White House item about CVS and Merlo. “Soon after, the company changed its corporate name to CVS Health — a symbol of the organization’s broader commitment to public health.”
CVS certainly deserves tons of applause for this. But CVS has far from warranted corporate sainthood based on the way it pays employees.
Merlo makes $22 million a year, according to CNN Money. He’s the 8th highest paid CEO in America. And he’s number 1 when it comes to making more more than his or her underlings.
“CVS has the greatest disparity between CEO pay and the median wage of its employees among the 100 highest-grossing companies in the U.S.,” Fortune Magazine reports. “You would have to combine the wages of more than 400 CVS Caremark employees to match the salary of the company’s CEO, Larry Merlo.”
On the other end of the salary spectrum at CVS, some low wage employees say annual raises were denied this year to absorb the cost of an increase to the minimum wage. “Salary increases are based on market-based rates and the individual performance of employees, said CVS spokesman Mike DeAngelis when asked about the allegation. “The increase to Rhode Island’s minimum wage does not change this.”
The median CVS employee earns $28,000 a year, according to Fortune Magazine (DeAngelis did not immediately respond to an email yesterday seeking more exact numbers). According to the Economic Progress Institute, this is about $4,000 a year more than a single adult needs to survive in Rhode Island and $31,000 less than a single parent of two would need to pay their basic living expenses.
CVS can and should do better than this.
Like selling cigarettes, there is money to be made by paying employees a pittance. But there’s also very real, if sometimes latent, negative social costs in doing so. For example, we know many CVS employees will require social services to augment their low wages. And we also know low wages lead to poor health decisions.
Most fortunately, CVS has balked at profiteering on activity with a negative social impact. “This is the right thing to do,” said CVS when it stopped selling tobacco products. Just two years after severing its ties to ALEC, this is a hugely promising step for the Woonsocket-based corporation.
Paying a living wage to all employees is also the right thing to do. Let’s hope Michelle Obama impresses upon Merlo that economic security is also an important function of community health as well.