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August 04, 1997 02:00 AM

EXECUTIVE-WORKER PAY GAP GROWING

Steve Toloken
Assistant Managing Editor
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    WASHINGTON — For plastics industry wages, a rising tide seems to be lifting all boats. It just helps to start the trip on the deck of the Queen Mary.

    Total pay for the 100 highest-paid plastics industry executives — salary, bonus and lucrative stock options — has grown from an average of $540,000 in 1993 to $840,000 in 1996. That's a 55 percent increase.

    While salaries and hourly wages for most plastics managers and production workers have not kept that pace, they have risen 10-20 percent, according to a survey conducted by the Washington-based Society of the Plastics Industry Inc. of Washington. Average wages of all hourly plastics workers rose 14 percent, from $8.87 an hour in 1993 to $10.10 last year, the SPI survey said.

    That widening pay gap mirrors national trends, including what the AFL-CIO Executive PayWatch program says is a growth in the ratio of chief executive officer to ``average worker'' pay from 44:1 in 1965 to 212:1 now. The median executive pay increase of 20 percent last year was far ahead of an 11 percent profit increase, a 3.3 percent increase in worker wages and the 2.7 percent rise in consumer prices, the union said.

    ``You are not seeing anything close to shared benefits,'' said Executive PayWatch spokesman Chris Bohner.

    Some of the stock increases that boost executive pay also come from riding on the growth of the bull market, he said.

    For industry executive search consultants, the faster growth at the top reflects the boost in income and company value that such leaders bring. The Plastics News' stock index of U.S. and Canadian plastics companies increased 24 percent in 1996, and pay for the 100 highest-paid executives in the survey rose more than 13 percent.

    ``It is very much economically justified,'' said James Aslaksen, a partner in the Chicago-based execu- tive search firm Lamalie Associates. ``The benefit to shareholders far outweighs the cost to shareholders.''

    Sunny Mehta, president of search firm H.R. Inc. in Mequon, Wis., said senior executive positions demand quick results and some unique talent.

    ``People who can perform those functions are hard to find,'' he said. ``It is not easy to find executives who can deliver.''

    Companies also are using stock options more because changes in the tax laws in the first Clinton administration cut corporate tax deductions for any salary over $1 million that was not linked directly to performance, said Rhoda Edelman, managing director of Pearl Meyer & Partners, a New York executive compensation consulting firm. Good executives are creating jobs and boosting corporate assets, so the increase in pay generally is justified, she said.

    But firms need to be wary of putting too much compensation into stock options that make corporate leaders too beholden to short-term Wall Street interests, and instead should structure some pay around long-term company goals like market share or growth in earnings, according to Edelman.

    The real test of pay-for-performance will happen when the market takes a downturn, she said.

    In spite of the gap, several industry headhunters have said the strong economy creates a good job market for employees right now, particularly in engineering and technical positions.

    Pay of plant engineers, SPI figures indicate, rose 30 percent between 1992 and 1996, from $39,200 to $51,100.

    The SPI surveys are self-reported, and the same companies do not always provide data from year to year. But trends suggest pay increases generally between 10 and 20 percent.

    For general managers, pay rose 15.5 percent in that period, from an average of $87,800 to $101,400. Plant managers saw a 10.6 percent boost, to $64,400, and vice presidents of sales and senior salespeople had increases of just under 20 percent, the SPI survey indicated.

    Manufacturing wages in general rose 3.7 percent between 1994 and 1995, the last full year that federal figures cover.

    Base pay for executives and nonexecutives alike is projected to increase 4 percent in 1997 and 1998, but executive pay rises about 10 percent when incentives are considered, according to figures from the New York-based Conference Board.

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