Economic Find: Runaway CEO Pay

In the past decade, while shareholders and workers lost trillions of dollars of their retirement savings, CEOs of America’s largest companies received more salaries and bonuses than ever before. In 2010, S&P 500 company CEOs received an average of $11.4 million in compensation, which is a 23% increase in one year. Based on available data from almost 300 S&P companies, the combined total CEO pay of $3.4 billion could support over 102,000 workers (at a median annual salary). And, as the chart below illustrates, the ratio of CEO to average worker pay has jumped over 700%!

Corporations justify these exorbitant CEO salaries by arguing that they couldn’t attract the “cream of the crop” without paying them what they’re worth.  But, especially in the case of the Wall Street executives who helped create the financial crisis, it is difficult to argue that executives have earned these runaway salaries.

Fortunately, there are new congressional measures designed to put a check on excessive CEO pay. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act allows shareholders to have a “say-on-pay” vote on executive compensation. Furthermore, companies will now have to disclose their CEO-to-Worker pay ratio in their annual reporting. Of course, it remains to be seen if these measures will have any effect on the vast distance between the salaries of top executives and the average worker.

For more information, go to the AFL-CIO’s Executive Paywatch webpage.
CEO to Worker Pay





Created by CPE Member Economists David Kotz and Sue Holmberg

October 2011