What the Fortune 500 Tells Us About How America’s Economy Has Changed
The list’s transformation over the years reflects the impact of deregulation and exploding inequality.
By Eric Gardner, More Perfect Union
Since 1955, Fortune Magazine has ranked every major company in America by revenue. Without computers, the first team must have spent months sifting through hard copies of financial reports, compiling the data, and then maybe four minutes selecting a name: the Fortune 500.
The original goal of the Fortune 500 was to sell magazines, but over time, the list morphed into a bellwether of corporate America. Inclusion on the list is a badge of honor among executives and the media; companies brag about it on their websites and investor filings, and local news celebrates when hometown companies are included.
But what does it say about the economy? What does it mean for workers?
Take, for example, the 1955 list. General Motors topped it, a position the automotive giant would hold for the next two decades. Their largely unionized workforce exceeded 600,000 people, and for those workers, a job at General Motors was a ticket to the American middle class.
Fast forward 69 years, and Walmart reigns supreme, holding the position since George W. Bush’s first term. And the difference between GM workers during the Eisenhower administration and modern Walmart employees is night and day. According to its most recent financial filing, the median income for Walmart’s 1.6 million non-union workers is under $28,000 a year.
This is the first in a multi-part series that analyzes the list — what it says about America, our economy, and importantly, workers.
The basics
Part of the Fortune 500 list is an exercise in organization. Namely, how do you categorize massive corporations for analysis? The editors leverage the Global Industry Classification Standard (GICS), a system developed by investors to group companies together.
It’s not perfect, but it works reasonably well. For example, under GICS, oil giant Exxon Mobil is part of the Energy sector in the petroleum refining industry group. Exxon mostly drills for and refines oil. That makes sense, but others are a little bit murky.
You probably associate CVS Health with its seven-foot-long paper receipts, but retail sales only make up a third of its $357 billion annual revenue. CVS’s true financial future lies in areas such as in-home elderly care, back-office pharmaceutical management, and Medicare Advantage plans. For that reason, CVS is part of the Health Care Sector, rather than retail.
For simplicity's sake, this series focuses on the top 100 companies in America or the Fortune 100.
Comparisons are made to the 1996 list. Why 1996? That’s more or less the first “modern” list. Before that, Fortune had separate rankings for service companies like banks or retailers.
Health Care middlemen dominate our economy.
Healthcare is the Fortune 100’s largest segment by revenue. On the surface, this makes sense. America has over three hundred million people living in it, and keeping people healthy costs a lot. Drugs need to be developed, nurses need to be paid, etc.
But wasn’t always this way. Back in 1996, Health Care accounted for just 5 percent of the Fortune 100’s revenue; today, it’s 21 percent.
In 2024, eight of the 16 healthcare companies on the list are health insurers.
More than half of those health insurers —Cetene, Cigna, CVS Health, Elevance, Humana, and UnitedHealth — have been accused of fraud by either whistleblowers or the federal government, or of overbilling for Medicare Services.
The largest, UnitedHealth, has been accused of all three. Outside of the hat trick, they’re also fighting a class action lawsuit that alleges the company used an algorithm to prioritize profit at the expense of patients. The company is currently facing an antitrust probe by the Department of Justice.
CVS Health, the category’s second banana, recently promised investors to lower health insurance coverage and raise prices after a poor quarter.
Did you know that three medical distributors made the list? Cardinal Health, Cencora (formerly known as AmeriSourceBergen, and McKesson. In 1996, there was just one. Most people have never heard of these companies, but medical distributors specialize in distributing drugs and selling technology systems to healthcare providers. They combine to capture $743 billion each year.
When it comes to breaking the law, medical distributors are essentially undefeated. In 2022, the three combined to pay out half a billion dollars for their role in the opioid crisis, but it doesn’t stop there.
In 2008, Cardinal Health settled allegations that it violated anti-kickback laws. In 2017, Cencora paid $260 million and pleaded guilty to charges that it skirted safety regulations to boost profits when filling cancer drugs. McKesson, meanwhile, agreed last year to a nearly $150 million settlement around price-fixing.
Surprisingly, perhaps, there are just five pharmaceutical companies that made the list–AbbVie, Bristol-Myers Squib, Johnson & Johnson, Merck, and Pfizer.
Finance rules America
There’s never been a better time to work with money. Over one-fifth of the Fortune 100 list is composed of financial service companies, which include banks that lend money to individuals and businesses and insurance companies that insure against loss.
Finance used to be fairly boring. It had a rule: Borrow at 3 percent, lend at 6 percent, and be on the golf course by 3:00. If you think I’m kidding, the Fed once wrote a paper examining the slogan.
Finance does serve one major purpose: allocating capital, or lending money to businesses and people in an efficient way. The 1996 list represented the way things used to be. In 1996, 17 financial services companies made the top 100, accounting for about $744 billion in annual revenue (adjusted for inflation).
Fast forward to 2024, and the number of companies increased to 22. Meanwhile, revenue more than tripled to over $2.3 trillion.
So what happened? Consolidation and deregulation. Back then, with over $63 billion in inflation-adjusted revenue, Citicorp was the largest commercial bank. But when politicians stopped enforcing anti-trust laws and repealed banking laws in the nineties, the company went shopping.
Citi bought up a number of different institutions, including insurance conglomerate Travelers Group in a record deal. Last year, Citi (which changed its name to the super creative Citigroup following the merger) took in more than double the company's revenues in 1996.
Citigroup isn’t even the country’s largest bank. That honor goes to JP Morgan, with nearly $240 billion in annual revenue. JP Morgan got this big through, well, mergers.
The biggest change, however, may be how management approaches running a bank. The simple 3-6-3 rule is a relic of history. Financial institutions, Pratistha Rajkarnikar of Boston Unversity writes, are “increasingly not going towards building factories or hiring workers, but towards investing in stocks, bonds, and mutual funds to reap short-term profits from rising asset prices.”
Pay disparity varies widely
CEOs get paid a lot, they always have. In the mid-1990s, the typical CEO made $118 for every dollar a worker was paid. By 2020, that number ballooned to $351.
The Fortune 100 is no exception. According to the most recent proxy filings, the average company on the list has a 330:1 ratio.
Most people credit the expanding gap to the rise of executive stock-based compensation.
The most equitable sector is Energy, which averages 132:1. The ten companies on the list range from 66:1 to 240:1.
And the worst industry for workers? Communication services at 602:1. That number is skewed by Charter Communications, who thought it was a good idea to pay CEO Chris Winfrey $89 million.
Surprisingly, however, Charter isn’t the most unequal company on the list. That award goes to Coca-Cola, which posted a staggering 1,800:1 pay ratio last year.
The best ratio for workers? That belongs to Freddie Mac and Fannie Mae, the quasi-government-controlled mortgage giants. Their CEO-pay ratio is just 4:1.
The next installment of this series will dive a bit deeper into the pay ratios, and what they say about our economy.