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What Trickle Down? Worker Pay Up 12% Since 1978 Compared To 940% For CEOs

Published Friday, August 16, 2019
by CBS News
What Trickle Down? Worker Pay Up 12% Since 1978 Compared To 940% For CEOs

The chasm between what the country's corporate leaders and their Workers earn is widening to Grand Canyon-like proportions, according to new research that shows CEO compensation surged 940% between 1978 to 2018 - while the average Worker saw a meager 12% pay hike over the same 40-year period.

"CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills," Economist Lawrence Mishel and Research Assistant Julia Wolfe said in the report from the Economic Policy Institute (EPI), a Left-leaning Think Tank.

Depending on how it's calculated, the average pay of CEOs at the 350 biggest U.S. companies last year came to $17.2 million, the EPI research found - or, alternatively, about $14 million, with the smaller number valuing the stock options that make up a big chunk of CEO pay at the time they were granted rather than when they were cashed in at typically higher prices.

Last year Chief Execs got $278 for every $1 a typical Worker earned, according to Mishel and Wolfe.

Back in 1965, top Corporate Chiefs earned $20 for every dollar a typical Worker earned, with that ratio rising to 58-to-1 by 1989.

The gap widened dramatically in the following decades, they noted, due to a shift in the 1990s and 2000s to compensate CEOs mostly with stock options, restricted shares and other incentive-based pay fueled a spike in their earnings.

Other factors that have driven income inequality in recent years: Failure to raise the Federal Minimum Wage; Eroding Union Membership and globalization - all of which reflect shifts in economic policy in ways that favor big corporations and the rich, Mishel said. 

The EPI findings are in line with an analysis by Equilar for the Associated Press earlier this year that found that CEOs at S&P 500-listed companies made a median of $12 million last year, including salary, stock and other compensation. 

Many CEOs who haul in massive stock awards aren't necessarily demonstrating their worth, EPI's Mishel told CBS MoneyWatch.  Rather, the jump in executive compensation broadly reflects the run-up in stocks in recent years.

"When every industry stock goes up, their stock goes up, and they're rewarded as though they hit a triple.  That's not for performance as they are sitting in the bleachers," Mishel said.

Excessive CEO pay is the result of a rigged system that creates the wrong incentives for top executives and is the same time terrible for company morale, observed Steven Cliffords, CEO of King Broadcasting for five years and National Mobile Television for nine. 

"When people talk to me, they'll say, 'Yeah, but look at those baseball stars and all the money they make,'" Cliffords said, "but there's a key difference: Baseball players make their money in what's essentially an auction market, where teams bid for their services.  It's the same with movie stars.  You know Mike Trout is going to improve any team he's on, that Meryl Streep is going to improve any movie she's in."

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