- A new report from the Economic Policy Institute showed the average CEO compensation at the US’s 350 largest public companies grew to just under $US19 million in 2017, up 17.6% from the year before.
- At the same time, compensation for the average US worker grew 0.3% in 2017.
- The ratio of CEO-to-worker compensation grew to 312-to-1 in 2017, up from a 58-to-1 ratio in 1989.
The compensation for CEOs at the US’s biggest public companies continued to surge in 2017, according to a new report, but the workers in those same industries are seeing meager gains.
A study by the Economic Policy Institute, a liberal think tank focused on labour issues, found that total compensation for CEOs at the 350 largest publicly traded companies in the US rose to $US18.9 million in 2017, up 17.6% from the year before.
But compensation for the average worker in the US rose just 0.3%.
The study, by EPI’s Lawrence Mishel and Jessica Schieder, also found that the ratio of average CEO to worker compensation grew to 312-to-1. This is up from a 20-to-1 ratio in 1965, and a 58-to-1 ratio in 1989, but remains below the peak of 344-to-1 in 2000.
To determine CEO compensation, Mishel and Schieder’s study looked at stock options realised, salary, bonuses, restricted stock grants, and long-term incentive payouts. The researchers determined the reason for the CEO surge is mostly due to the stock component of many executive compensation packages.
“The surge in CEO compensation measured with realised stock options was driven by the stock-related components of CEO compensation (stock awards and cashed-in stock options), not by changes in salaries or cash bonuses,” Mishel and Schieder wrote.
The increase in realised stock gains is unsurprising given the 20% surge for major US stock indexes in 2017.
The researchers also used a separate measure of stock gains to determine CEO compensation to help strip out some of the gains from last year’s stock market surge.
“Because the decision to realise, or cash in, stock options tends to fluctuate with current and potential stock market trends (as people tend to cash in their stock options when it is most advantageous to do so), we also look at another measure of CEO compensation, to get a more complete picture of trends in CEO compensation,” Mishel and Schider wrote. “This measure tracks the value of stock options at the time they are granted. By this measure, CEO compensation rose to $US13.3 million in 2017, up from $US13 million in 2016.”
The research comes as focus on income inequality, the stark difference in wage growth for average American workers compared to their wealthy counterparts, remains a top focus for economists and politicians.
According to EPI, CEO pay is also growing at a much faster pace than even the average pay of the top 0.1% of income earners in the US.
From 1978 to 2017, CEO compensation grew 979% (on the stock options granted basis) or 1,070% (based on the stock options realised basis). At the same time, wages for the top 0.1% grew at 308%.
For the average worker, the compensation gain was even more meager at just 11.2%.
“Over the last several decades, CEO pay has grown much faster than profits, the pay of the top 0.1% of wage earners, and the wages of college graduates,” the study said.
The pay bump comes even before the changes from the GOP tax law, so it is unclear how those changes will impact compensation for both workers and CEOs.
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