The average CEO of a big American corporation made 20 times more than a typical employee in the same industry in 1965. Today, the average CEO is making almost 300 times more, according to a new report from the Economic Policy Institute.
Researchers gathered data from the largest 350 firms in the US and compared them to the average annual compensation of workers in the same key industry. The following chart shows how the CEO-to-worker compensation ratio rose dramatically in the boom years of the late 90s and has generally remained quite high since. Today, CEOs earn about 300 times more than their employees:
CEO pay in the late 60s and 70s grew despite a bad market, continued growing and even exceeded the growth of the booming market in 2000. The fall of the market had CEO compensation pare back significantly, though by 2007 pay had worked its way back up to 2000 levels. Following the financial crisis in 2008, pay has become much more closely linked to performance:
Following the Great Recession, companies’ boards have “learned to avoid investor pay irritants and red flags, such as compensation that is not linked to performance and pay perks to cover taxes executives owed,” according to The Wall Street Journal. The Journal also reports that a large majority of shareholders now approve of their companies’ executive pay packages.
But while a healthy market has brought more money to CEOs at high performing companies, the lower and middle classes have struggled with low wages and high unemployment.
Check out the full report over at the Economic Policy Institute.
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