The top-level management of corporations has seen their salaries increase to 1000% over the past 40 years, which is nearly 100 times the rate of average workers, according to a report published this week.
According to the Economic Policy Institute, wealth inequality continues to quickly accelerate, mainly because of the financial crisis. This report was measured between the CEOs of America’s Top 350 firms and their rank and file employees.
Looking at their pay, worker benefits, and the value of their stock options when exercised, the total compensation received by CEOs amounted to 1,007.5% increase from 1978 to 2018. Comparing this to the rank and file workers, they have only gotten an increase of 11.9% after four decades. When another measure of computation is used, which considers the realized value of stock options, the growth enjoyed by the CEOs are still measured at 940.3%.
The researchers from the Economic Policy Institute, Julia Wolfe and Lawrence Mishel, called for action to significantly decrease the pay gap, even if it would mean requiring the firms where the inequality is great.
In their report, they wrote, “Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with. The economy would suffer no harm if CEOs were paid less or taxed more.”
This disparity between the general workforce and the top executives has always been a critical yet often ignored issue, so the gap has increasingly widened over the decades.
When comparative terms are used in the options-exercised formula, CEOs now make 278 times much more than the ordinary worker. Looking back, the difference is it was just 58 times in 1989 and 20 times in 1965. But, it was actually down from the highest peak of 368 in 2000. The total compensation growth since 1978 has surpassed the stock market growth of 706.7% and higher earners salary growth of 339.2%.
Both Wolfe and Mishel proposed a set of remedies like higher tax rates for executives, adding taxes for companies with larger inequality, imposing a luxury tax, and corporate reforms. They add, “We need to enact policy solutions that would both reduce incentives for CEOs to extract economic concessions and limit their ability to do so.”
According to S&P Capital IQ, a list of the highest-paid CEOs are David Zaslav of Discovery, earning $129.5 million, Lawrence Ellison of Oracle, earning $108.9 million, John Legere of T-Mobile who earns $66.5 million, Robert Iger of Disney who earns $65.6 million, and Lachlan Murdoch of News Corp earning $50.7 million.
But people consider controlling the pay of CEOs near impossible because of opposition and the argument about the value of CEOs compared to rank and file employees.
According to Carol Roth, the CEO of Intercap Merchant Partners, “Nobody gets upset that Steph Curry or Beyonce makes a certain amount of money, but the person who is an usher at the stadium makes a fraction of what they made. So I don’t understand why there is any comparison between what a CEO makes, and an “average” worker makes.”
Roth believes that the numbers are not that reliable because corporations are very different. There are a few CEOs with enormous compensation packages and added that taking a percentage of their pay and redistributing this amount to all the workers will not give much of a difference anyway.
She also adds that CEOs are not paid at the expense of the workers. The workers receive the value of their salary because of their market rate. She also says, “If the CEO didn’t get paid that much, it’s not that the workers would get paid more. That money would go somewhere else.”