US CEO Compensation Has Grown 940% since 1978. What About Yours?

US CEO Compensation Has Grown 940% since 1978. What About Yours?973
source: Pixabay

According to the latest study by The Economic Policy Institute, the chief executives at the leading US firms received $17.2 m in pay in 2018. In other words, that makes 278 times the average worker's wage. 

The researchers also estimated that between 1978 and 2018, the average remuneration of the corporate leaders of the US top 350 companies, has increased by 1,007.5%. 

One of the most widespread explanations for that are the returns of the stock market that are often used to justify the sky-high CEO wages. The S&P index of the largest US companies increased 706.6% over that period, the researchers estimated.

The scientific team also had a look into the CEO compensations in 2017 and 2018 to find out the money they took home went up by 7.1% in 2018, a slight decrease from the 9.2% in 2017. As the study points out, the increase is due to the awards of stocks in their companies. Those of the corporate lions who benefited from the shares they were awarded have enjoyed a pay increase of 52.65 since 2009.

CEOs received, on average $7.5 million in stock premiums in 2018, which equals to almost a half of their remuneration. What about their employees?

Their pay has stagnated since the end of the recession, the study found, highlighting that it grew at just 1.6% over 2018.  Moreover, the workers' annual compensation increased by only 5.3% during the period of economic recovery. Their average remuneration decreased by 0.2% between 2017 and 2018, the study claimed.

According to the Economics Policy Institute, the gap between the remuneration of the average workers and their CEOs have widened significantly. For example, in 1965, the CEO usually got 20 times as much as their employees. By 1978, the ratio went up to 30-1. By 1991, it was 121-1. 

What is the easiest and fastest way to close this gap? According to Lawrence Mishel, a fellow at the Economic Policy Institute, the government should significantly increase taxes on top earners

The analysis goes viral in times when some of the wealthiest people in our country have publicly expressed their concerns about the growing income inequality. 

Ray Dalio, the founder of Bridgewater, the world's leading hedge fund, even called the pay gap in the US ''a national emergency.''  His colleague, Jamie Dimon, the CEO of JP Morgan, echoed his words saying that we need a ''Marschall plan'' to combat the income inequality.

What do you think? Do you agree or disagree that the heavy tax burden is the fastest way to close the pay gap in the US?