CEOs at the top 350 firms in the US were paid $21.3 million on average last year, a 14% increase over the year before, as top executives continue to see their compensation skyrocket, according to a report out Tuesday by the left-leaning Economic Policy Institute.
Compensation for CEOs has far outpaced a typical worker’s earnings over the last 40 years. From 1978 to 2019, CEO pay grew 1,167%, while compensation for the typical worker has grown by just 13.7% during that time frame. CEO pay far outstrips earnings growth for even the top .1%, as it grew 337% in the last 40 years.
The difference in pay between a CEO and the average worker has grown precipitously as a result of these uneven pay increases. The CEO-to-average-worker ratio was 320-to-1 last year, but was just 31-to-1 in 1978.
Unsurprisingly, the general public isn’t happy about CEO compensation. A Stanford University survey from 2016 found that 74% of Americans think that CEOs aren’t paid the correct amount compared to an average employee.
The Economic Policy Institute used realized compensation for their analysis, which counts stock awards when vested, and stock options when cashed in. Compensation for CEOs has tracked closely with the stock market, as stock options and awards account for roughly three fourths of their earnings, while salary and cash bonuses account for the rest.
Compensation for top executives has been under the spotlight during the coronavirus pandemic as companies bleed cash. According to a July report from compensation firm CGLytics that was reviewed by the New York Times, two-thirds of the chief executives who took reductions in their compensation during the pandemic saw cuts of 10% or less in their total compensation.
For instance, Disney executive chairman Bob Iger announced he would forgo his salary from the end of March through 2020, but that $2.25 million in forgone pay represents just 3.3% of Iger’s total compensation, according to CGLytics.
Similarly, Delta Airlines CEO Ed Bastian took a $714,000 salary cut, which is just 5.35% of his total compensation, and United Airlines CEO J. Scott Kirby took a $790,000 salary cut, which is just 9% of his total compensation for the year, according to CGLytics.
That's despite the fact that GDP fell at an annual rate of 32.9% in the second quarter, and that the U.S. economy has added back less than half of the 22 million jobs that have been lost during the coronavirus pandemic.