CEOs are paid 200 times more than their average employees, who fall further behind every year

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Now that Labor Day is behind us, it’s a good time to evaluate whether American workers are getting paid what they’re worth. One good way to do that is to compare their pay to the salary of their CEOs.

According to data analyzed by the Associated Press, it’s estimated that many CEOs are getting paid nearly 200 times what their workers were paid last year.

“The median pay package for CEOs rose to $16.3 million, up 12.6%,” through 2023, according to the AP. Wages and benefits for private-sector workers increased by only 4.1% over the same period.

In other words, the typical worker wage not only trails that of their CEOs, but it falls further behind every year. This rising inequality between CEO’s compensation and that of their employees may be one of the reasons that some workers feel they have been left out, and will never catch up. Rampant inflation, which appears to be ending, ravaged employee’s earning power.

A number of outside observers believe that executive pay has reached extreme levels. Tesla CEO Elon Musk is exhibit No. 1.

CEOs with exorbitant CEO-to-worker pay ratios

In June, Equities News discussed how Tesla TSLA 

shareholders approved a $46 billion dollar pay package for CEO Elon Musk, the largest compensation package ever given to a U.S. corporate executive.

Compare that to the salary of the typical Tesla employee. According to Tesla’s 2023 proxy filing, the “median annual pay of a non-CEO Tesla employee was $45,811.” (Musk’s pay was more than one million times that of his employees!)

Although Elon Musk’s pay package is miles higher than that of anyone else, other CEOs have exorbitant CEO-to-worker pay ratios. According to the Institute for Policy Studies annual Executive Excess Report 2024, Ross Stores CEO Barbara Rentler was given an $18.1 million pay package, meaning she was paid more than 2,100 times as much as “the $8,618 pay that went to her company’s ROST 

median-compensated employee, a part-time store associate.”

Another CEO with an extremely high CEO-to-worker pay ratio: Nike CEO John Donahoe earned $32.8 million in 2023, “975 times as much as the athletic wear company’s NKE 

$33,646 median pay,” says the Institute for Policy Studies.

CEOs with the highest 2024 compensation packages

According to the data analyzed by the AP, the following are the top five CEOs who recently had the highest yearly compensation packages (not including Elon Musk).

  • Hock Tan, Broadcom: $162 million per year

  • William Lansing, Fair Isaac Corp.: $66.3 million

  • Tim Cook, Apple: $63.2 million

  • Hamid Moghadam, Prologis, Inc.: $50.9 million

  • Ted Sarandos, Netflix: $49.8 million

Note: These are approximate pay packages that may include bonuses, awards and other perks.

Female CEOs with the highest salaries

According to the AP’s annual compensation survey, the following are the top five female CEOs of S&P 500 companies with the highest salaries.

  • Lisa Su, Advanced Micro Devices: $30.3 million

  • Mary Barra, General Motors: $27.8 million

  • Jane Fraser, Citigroup: $25.4 million

  • Kathy Warden: $23.5 million

  • Carol Tome, UPS: $23.3 million

Although more women have broken the glass ceiling and reached the C-suite, the pay gap between male CEOs and female CEOs is still quite wide.

Note: These are approximate pay packages that may include bonuses, awards and other perks.

Suggested solutions

To help fix the CEO-to-worker pay gaps, the Institute for Policy Studies has three recommendations:

  • Tax and restrict stock buybacks (which prevents CEOs from cashing in on short-term price jumps they “artificially created.”)

  • Subject corporations with excessive CEO pay to higher tax rates.

  • Use federal contracts and subsidies to discourage wide corporate pay gaps.

In a poll conducted by Gallup and Bentley University, two-thirds of Americans believe that companies aren’t doing a good job of reducing the pay gap between CEOs and employees. More than half of U.S. adults believe it’s extremely important for companies to reduce the pay gaps between CEOs and average employees.

Not surprisingly, legislation that could reduce the huge gaps between the CEO and average workers has long been opposed by corporate lobbyists. They claim the huge pay bonuses are necessary because CEOs are primarily responsible for increasing the financial worth of the company. Without the skills of the CEO, the lobbyists claim, shareholder value will suffer.

Why are CEOs paid so much?

It’s up to the board of directors to explain to shareholders why their CEO deserves a higher-than-normal salary, especially when the amount is excessive. Many boards are willing to pay huge sums to top-notch CEOs whom they believe have the skills necessary to run the company (and help boost its stock price). They often claim that huge pay packages are necessary to attract and keep top CEO talent.

Institutional Shareholder Services, a proxy advising service, recently issued a press release about a study it conducted that claimed that roughly 70% of S&P CEOs in the study received a pay increase while approximately 27% of them saw their pay decrease.

They also discovered that most of the pay changes resulted from an increased value of stock and option awards. At the same time, they found that “companies in the S&P 500 generally exhibited strong total shareholder returns over the measurement period (one-year).”

Conclusion

As long as the stock market keeps moving higher and profits in major corporations keep increasing, CEO pay will likely increase. In reality, shareholders aren’t complaining and, in many cases, approve bloated pay packages.

Unfortunately, while their CEOs receive astounding salaries, employees often get the shortest end of the stick, especially for employees who earn lower wages (such as those working at retail stores).