CEO Salaries Hit Historic High
Average top exec earned $34.4 million in 2018, 660 times the average worker's pay.
2018 was a boffo, rich, luxe year for corporate executives in America and a rotten one for average workers. Once again.
“Something about this feels inevitable,” writes New York Times reporter Peter Eavis in the newspaper’s annual roundup of CEO salaries. “Nearly every year, C.E.O.s already earning huge sums get even bigger payouts. In 2018, our analysis shows, they did particularly well: The median boss received compensation of $18.6 million — a raise of $1.1 million, or 6.3 percent, from the year prior.”
Forty years ago, in 1979, it was big news when the nation’s top paid executive, Chrysler’s boss Lee Iacocca, earned $1.2 million. Now CEOs nearly get that in their annual raise.
When Iacocca was the top paid CEO, news stories noted he earned six times more than the president of the U.S. A little more than two decades later, in 2002, the top paid executive, Lawrence J. Ellison, then the CEO of Oracle Corp, earned $706.1 million or 1,765 times more than the president (by then paid $400,000). Last year the top-paid executive, Elon Musk of Tesla, earned $2.3 billion, or 5,750 times more than the $400,000 presidential salary.
Musk’s salary is 1,916 times higher than what Iacocca earned. If the minimum wage for workers (which was $2.90 in 1979) had risen at the same rate as the top executive’s salary during that period, the minimum wage would now be $5,556 per hour.
Meanwhile the pay of average Americans workers has barely budged during that time: Middle-wage workers’ hourly wage is up by 6 percent since 1979 while low-wage workers’ wages are actually down by 5 percent, as data from the Economic Policy Institute shows.
Last year was no different for workers, despite the lowest unemployment in many decades, which should have pushed wages up. While the average top CEO got a more than $1.1 million raise, the average worker saw pay decline in real dollars, rising by just 1.2 percent in 2018, while inflation rose by 2.44 percent.
While the Times story leads with the median top executive salary, its chart shows the average top exec’s pay was $34.4 million — or 660 times more than the average employee earned. Many CEOs earned at least 1,000 times more than the average employee. Musk earned 40,668 more than the average employee. Back in 1979, Iacocca earned about 40 times more than the average worker.
The only company with a Milwaukee connection in the top 200, was Johnson Controls International, long based here, but now headquartered in Cork, Ireland. Its CEO George Oliver $15.4 million, or 310 times more than the average employee earned.
Below the top 200 executives are six in metro Milwaukee who run companies listed among the top 500 of publicly-traded companies in America. And they are doing very nicely, thank you, according to the most recent figures compiled by bloomberg.com.
Compensation of Top Metro Milwaukee CEOs
Jeffery W. Yabuki, Fiserv Inc., $12,410,769
Michelle D. Gass, Kohl’s Corp., $12,340,445
And these compensation figures often understate what executives will eventually earn, the Times story notes, because the analysis is “based on headline compensation numbers from proxy statements. But those are estimates, often based on companies’ complex calculations of what stock and options grants will be worth in the future. Some shareholder advisory analysts do their own math and conclude that the awards are likely to pay out far more than companies claim.“
These astounding annual gains for top CEOs has come in spite of “recent efforts to restrain C.E.O. pay,” the Time story notes. “Earlier this decade, Congress required that companies disclose the ratio of their chief executive’s pay to that of their median employee. Lawmakers also gave shareholders a special but nonbinding vote on the matter. Another trend theoretically contributing to accountability is that company boards, under pressure from some shareholders and advisory firms, have tied a lot more of a chief executive’s pay to a company’s performance.”
Yet CEO salaries just keep rising. The reasons are many, as I’ve previously reported, but boil down to the fact that top execs hold all the power. The serve on each other’s corporate boards and are generous to each other. They pay the fees of corporate compensation consultants, who typically recommend generous raises, studies show. They pay the fees of board directors, who were paid an average of $255,000 in 2014 at the top 500 companies, which had increased 50 percent since 2006, a Boston Globe analysis found and which has probably increased significantly since then. And the board members who earn these fees for a few hours work per week are, in turn, generous to the executives who pay them.
As William McDonough, then chairman of the Public Company Accounting Oversight Board, observed back in 2004, the rise in salaries since 1979 has nothing to do with market forces or paying more for talent. “I knew a lot of CEOs in 1980 and I can assure you that the CEOs of 2000 were not 10 times better — if better at all,” he said.
And while efforts to tie CEO salaries to increases in a company’s value could help bring some logic and market discipline to compensation awards, it will do nothing for average employees, who typically get no stock awards. While the richest 10 percent of Americans now own 84 percent of the value of all stocks, most Americans own no stocks at all.
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