www.chron.com/business/article/Executive-pay-still-rising-despite-energy-s-9142269.php
That CEO pay grows far faster than pay of the top 0.1 percent of wage earners indicates that CEO compensation growth does not simply reflect the increased value of highly paid professionals in a competitive race for skills (the “market for talent”), but rather reflects the presence of substantial “rents” embedded in executive pay (meaning CEO pay does not reflect greater productivity of executives but rather the power of CEOs to extract concessions).
Average compensation among the 500 highest paid executives of Houston's publicly traded companies rose in 2015, ticking up by about $43,000, or 1 percent, to $3.62 million, according to data compiled by corporate consultants Longnecker 2015 saw a pretty flat stock market.
Still, Mishel and Schieder observed that this ratio was "light years beyond the 20-to-1 ratio in 1965." They also noted that while CEO compensation grew by about 940% from 1978 to 2015 after adjusting for inflation, the typical worker's pay grew just 10% over that time.
For more, check out the full EPI report here.
www.epi.org/publication/ceo-and-worker-pay-in-2015/
If CEOs earned less or were taxed more, there would be no adverse impact on output or employment. Policy solutions that would limit and reduce incentives for CEOs to extract economic concessions without hurting the economy include:
What this report finds: In 2015, CEOs in America’s largest firms made an average of $15.5 million in compensation, which is 276 times the annual average pay of the typical worker. While the CEO-to-worker compensation ratio is down from 302-to-1 in 2014, it is still light years beyond the 20-to-1 ratio in 1965. The drop in 2015 primarily reflects a dip in the stock market and not any change in how CEO pay is being set. Therefore, CEO pay can be expected to resume its sharp upward trajectory when the stock market resumes rising.
Why it matters:
Exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers since the higher pay does not reflect correspondingly higher output.
From 1978 to 2015, inflation-adjusted CEO compensation increased 940.9 percent, 73 percent faster than stock market growth and substantially greater than the painfully slow 10.3 percent growth in a typical worker’s annual compensation over the same period.
How we can solve the problem:
Reinstate higher marginal income tax rates at the very top
Remove the tax break for executive performance pay
Set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation
Allow greater use of “say on pay,” which allows a firm’s shareholders to vote on top executives’ compensation.
Introduction and key findings
Chief executive officers of America’s largest firms earn more than 2.5 times more than they did 20 years ago and at least seven times more than 30 years ago, despite a drop in compensation in 2015 corresponding to faltering stock prices in late 2015.
Consequently, the growth of CEO and executive compensation overall was a major factor driving the doubling of the income shares of the top 1 percent and top 0.1 percent of U.S. households from 1979 to 2007 (Bivens and Mishel 2013; Bakija, Cole, and Heim 2012). Since then, income growth has remained unbalanced: as profits have reached record highs along with stock market highs, the wages of most workers have continued to stagnate over the last dozen years or so (Bivens et al. 2014; Gould 2016).
The CEO-to-worker compensation ratio, 20-to-1 in 1965, peaked at 376-to-1 in 2000 and was 276-to-1 in 2015—down from 302-to-1 in 2014 but still far higher than in the 1960s, 1970s, 1980s, or 1990s.
In examining compensation of the top CEOs relative to that of other high earners, we find:
Over the last three decades, compensation for CEOs grew far faster than that of other highly paid workers, i.e., those earning more than 99.9 percent of wage earners.
CEO compensation in 2014 (the latest year for data on top wage earners) was 5.61 times greater than wages of the top 0.1 percent of wage earners, a ratio 2.43 points higher than the 3.18 ratio that prevailed over the 1947–1979 period. This wage gain alone is equivalent to the wages of 2.43 very-high-wage earners.
Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment.
Also over the last three decades, CEO compensation increased more relative to the pay of other very-high-wage earners than the wages of college graduates rose relative to the wages of high school graduates: thus, the escalation of CEO pay does not simply reflect a more general rise in the returns to education.
Critics of these analyses suggest looking at the pay of the average CEO, not CEOs of the largest firms. However, the average firm is very small, employing just 20 workers, and does not represent a useful comparison to the pay of a typical worker, defined here as an employee of a firm with roughly 1,000 workers. Workers in small firms are atypical: half (52 percent) of employment and 58 percent of total payroll are in firms with 500 or more employees, and firms with at least 10,000 workers account for 27.9 percent of all employment and 31.4 percent of all payroll.
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