CEO compensation at the biggest corporations has grown by nearly 1,000% over the last 40 years when adjusted for inflation, according to a new report from the Economic Policy Institute. Average CEO compensation at the 350 publicly-traded corporations with the highest revenue was $15.2 million in 2013. That’s a 21% increase just since 2010.
For those who think that the market value of various skills is responsible for the unusual growth in CEO pay, the EPI report concludes that’s not the case, because other highly paid positions didn’t see the same growth. Furthermore, if CEOs all took a pay cut, it wouldn’t affect the productivity of their companies at all.
This report also shows that workers aren’t rewarded for their productivity, as they once were in a bygone era. Worker pay only grew by a little more than 10% over the same period, yet corporate profits are at record highs, along with the stock market (exactly how are we becoming a socialist nation, Republicans?).
The EPI notes that, in 1965, CEO pay was approximately 20 times what their average worker’s pay was. By 1978, that was a ratio of 29.9 to 1. It peaked in the mid-1990s at 383.4 to 1, and today is 295.9 to 1. In other words, on average, a CEO is making nearly 296 times what his average worker is making.
In the fast-food industry, that ratio is even worse, at 1,000 to 1. And companies like McDonald’s feel like they need to squeeze their franchisees for everything they’ve got. Royalties and a variety of fees from its franchisees are how McDonald’s corporate makes its money, and they apparently make plenty of it, enough to ease off on their franchisees (but they won’t). The same is true of many other fast-food chains that are franchises.
The EPI also says that CEO pay doesn’t reflect an increase in the market value of skills for highly paid employees. But it does show a strong presence of what they call “rents,” meaning that CEO pay also does not reflect increased productivity in those positions.
With Republicans in Congress voting against allowing shareholders to vote on executive compensation, this trend is likely to continue. It might even continue to get worse. It’s clear that CEOs aren’t willing to give up some of their slices of the wealth pie for the sake of the workers who keep their companies going. And the idea of shareholder value needs to go, also, because oftentimes, a company’s CEO is one of its biggest direct shareholders.
Republicans like to say that income inequality can only be tackled with policies that ultimately continue to favor the rich, like even fewer labor laws and more tax cuts. Some of them, like Rick Santorum in 2012, say that income inequality is fundamental to America, because that inequality makes people want to excel, so they can get richer, too.
Except it doesn’t work that way, not when the rich are in control of virtually everything, including their pay. The average worker doesn’t have the control over his pay that a CEO does. And CEOs and other C-suite officers increasingly take it all for themselves.