CEO-to-worker pay ratio: Here’s how much the average US executive makes
CEOs with salaries including stock options realized are being paid 278 times more than the average worker in their field, according to a new study.
The Economic Policy Institute (EPI) published its annual report on CEO compensation on Wednesday, which analyzed executive pay between 1978 to 2018.
The left-leaning think tank found that in 2018, CEOs at the top 350 companies in the U.S. were earning an average of $17.2 million.
“Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with. CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills,” the report's authors wrote.
The report looked at CEO earnings through two measures of compensation -- stock options realized, which tends to fluctuate more, and the more conservative measure of stock options granted -- each along with salaries, bonuses, restricted stock awards and long-term incentive payouts.
Because of the two measures of compensation, the report’s numbers vary, but the difference in the CEO-to-worker pay ratio is still vast.
Using the more conservative calculation of stock options granted, the average CEO makes $14 million, which is still 221 times more than the average worker.
Overall, CEO compensation has increased by 1,007.5 percent (or more conservatively, 940.3 percent) since 1978, according to the report.
Meanwhile, the typical American worker has only seen their wages grow by about 11.9 percent, the EPI said.
Back in 1965, the CEO-to-worker pay ratio was 20-to-1 for options realized and 16-to-1 for options granted. By 1978, the ratio was 30-to-1 for options realized and 23-to-1 for options granted.
The ratio reached its peak in 2000 at 368-to-1 for options realized and 386-to-1 for options granted, according to the study. That peak was attained at the height of the late 1990s tech stock bubble, EPI reported.
However, the ratio went down again when the stock market bubble burst -- and again during the financial crash of 2008. Yet CEO pay has remained extensively higher than compensation for the average worker, the report found, and the pay gap remains extensive.
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“Some observers argue that exorbitant CEO compensation is merely a symbolic issue, with no consequences for the vast majority of workers,” the authors of the EPI report wrote. “However, the escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0% and top 0.1% incomes, generating widespread inequality.”