CEO pay is 303 times that of workers, study finds
Chief executives of the country’s largest firms made 303 times more than a “typical” worker in 2014, according to a report from the Economic Policy Institute, a left-leaning think tank.
That number seems high, but is lower than it was in 2000, when CEO compensation peaked at 376 times that of the average worker.
The report found that average compensation in 2014 for CEOs of the largest firms was $16.3 million, up 3.9% from a year before and an increase of 54.3% since 2009 when the economy began to recover.
Broken down more simply, the report says CEOs earn three times more than they did 20 years ago.
The report said the increase in CEO compensation reflects “improving market conditions” and a “general rise in profitability,” which also boosted corporate stock prices.
CEO compensation often increases when the stock market rises and firms’ stock prices increase with it, the report said. In fact, most CEO pay packages allow compensation to increase whenever the firm’s stock value rises, according to the report.
“It seems evident that individual CEOs are not responsible for this broad improvement in profits in the past few years, but they clearly are benefiting from it,” the report said.
The report calculated average CEO compensation based on data from the 350 publicly owned firms in the U.S. with the largest revenue each year, and includes stock options exercised in a given year.
“The reason to focus on the CEO pay of the largest firms is that they employ a large number of workers, are the leaders of the business community, and set the standards for pay in the executive pay market and probably do so in the nonprofit sector as well,” the report said.
The salary of the “typical” worker was determined based on the wages and benefits of a full-time, full-year, non-supervisory worker in private sector production, a group the report says covers more than 80% of payroll employment.
The report also compared CEO compensation to that of other highly paid workers, finding that CEOs were paid 5.84 times more than the top 0.1% of wage earners in 2013, the most recent data for top wage earners.
With this finding, the report said CEO compensation growth did not reflect greater productivity for executives or a higher skill set, but “the power of CEOs to extract concessions.”
“Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment,” the report said.
For more business news, follow @smasunaga.
Your guide to our new economic reality.
Get our free business newsletter for insights and tips for getting by.
You may occasionally receive promotional content from the Los Angeles Times.