U.S. CEOs make 296 times as much as workers, study says
Workers' pay rose 10% since 1978, while those at the top made 937% more
CEO compensation at the top 350 U.S. companies is 296 times the wage of an average worker in their industry, an analysis by the Economic Policy Institute shows.
In 1965, top CEOs made 20 times the wages of an average worker in their industry, and in 1978 their pay was 30 times the wages of an average worker.
The EPI, a U.S. think-tank that advocates for greater wage equality, used a measure of CEO pay that includes salaries, bonuses, incentive payouts and stock options realized by the CEOs. It excluded Facebook from its analysis as the high-flying compensation of Mark Zuckerberg is considered an outlier.
The study released Thursday found average CEO compensation in 2013 was $15.2 million US, up 2.8 per cent since 2012, but an increase of 937 per cent since 1978.
Worker compensation stalled
In the period since 1978, a typical worker’s compensation increased by 10.2 per cent, and the value of stock doubled. Private sector production worker income in 1978 averaged $47,200, compared with $52,100 in 2013.
The average industrial wage in the U.S. has not yet recovered to the point it was at in 2007, before the deep recession.
CEO compensation also grew more than four times faster than that of other highly paid workers, including senior executives at those same companies who are the top 0.1 per cent of wage earners in the U.S., the EPI report said.
Part of the boost in CEO compensation over the past year has been the rapid rise in stock prices.
There is a trend to compensate top executives with a higher proportion of stock options, on the theory that this is an incentive to boost shareholder value.
During the recession, critics were upset that executives could enjoy big salaries and bonuses as their companies performed terribly in the stock market.
When the Dodd-Frank Act passed in 2010 in the U.S., its reforms included a "say on pay" provision that gave shareholders the right to vote on an executive's pay package every three years.
Companies' boards have responded to this regulation, and there has been a trend toward basing CEO compensation on how well a company is doing in the market relative to its competition.
The EPI's inequality measure has also improved since 2000, when average CEO pay was 383 times the pay of the average worker in their industry.