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CEO Pay in 2017 Was 312 Times the Typical Worker

Aug. 20, 2018
The average CEO of a top U.S. firm made $18.9 million last year compared with $62,431 for the typical worker.

The growth of executive compensation was the single largest factor behind the explosion of income for the top 1% and top 0.1% according to a new study from the Enterprise Policy Institute (EPI).

The group’s new report shows that CEO compensation surged in 2017, with CEOs making 312 times more than a typical worker in the firm’s industry.

In fact, the average CEO of a top U.S. firm made $18.9 million last year compared with $62,431 for the typical worker.

“What this means is that the fruits of economic growth are not going to ordinary workers; they’re going to CEOs whose pay continues to be very, very high and has grown far faster in recent decades than average working people,” the group concludes.

This puts CEOs of the largest publicly traded companies far above the earnings in the top 0.1% of all wage earners, $2.5 million (in 2016).

To put these numbers into perspective, CEO compensation has grown far faster than stock prices or corporate profits. CEO compensation rose by 979% (based on stock options granted) or 1,070% (based on stock options realized) between 1978 and 2017. The corresponding 637% growth in the stock market (S & P Index) was far lower.

Both measures of compensation are substantially greater than the painfully slow 11.2% growth in the typical worker’s compensation over the same period and at least three times as fast as the 308% growth of wages for the very highest earners, those in the top 0.1%.

The group offers some solutions as to how this can change by creating policy solutions to limit and reduce incentives and the ability of CEOs to extract economic concessions without hurting the economy include the following:

--Reinstate higher marginal income tax rates at the very top.

-- Set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation.

-- Set a cap on compensation and tax anything over the cap.

-- Allow greater use of “say on pay,” which allows a firm’s shareholders to vote on top executives’ compensation.

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