April 11, 2006


Caption: Goat union leader Cornelius Agrippa urges US workers to organize. “Are you guys sheep or what?”

These are great times to be a CEO but not so great times to be an American worker. That’s the short version of a special report on executive pay in the Sunday New York Times called “Off to the Races Again, Leaving Many Behind.”

According to the report, “New technology and low-cost labor in places like
China and India have put downward pressure on the wages and benefits of the average American worker. Executive pay, meanwhile, continues to rise at an astonishing rate.”

To be exact, that rate increased by 27 percent last year to a level of $11.3 million, based on a survey of 200 large companies. Median CEO income was a little lower at a modest $8.4 million, up by 10.3 percent.

Here’s the flipside: “By contrast, the average wage-earner took home $43,480 in 2004, according to Commerce Department data. And recent wage data from the Labor Department suggest that workers’ weekly pay, up 2.9 percent in 2005, failed to keep pace with inflation of 3.3 percent.”

The estimates of the ratio of CEO to average worker pay vary, but there is general agreement that the gap is growing. The Times cites a study which finds the average CEO of a major company “earns” more than 170 times the earnings of an average worker.

United for a Fair Economy estimates that the ratio among the largest companies is 431:1.

For medium sized corporations, the ratio between CEO and manufacturing worker pay is 44:1, much higher than similar ratios from other developed nations.

Once upon a time, worker and CEO pay grew at about the same rate. Beginning in the 1980s, however, executive pay hit a huge growth spurt while wages increased at a much slower rate. CEO pay even grew much faster than corporate earnings. This means the idea that CEO pay reflects better corporate performance doesn't hold water.

This has raised lots of eyebrows even in the business world. John C. Bogle Sr., founder and former chair of the Vanguard Group mutual fund company, was quoted in the Times as saying that CEOs “aren’t creating any exceptional value, so you would think that the average compensation of the C.E.O. would grow at the rate of the average worker. When you look at it in that way, it is a real problem.”

And here’s a real eye-opener. According to Holly Sklar, author of A Just Minimum Wage, in 1980, the average CEO made as much as 97 minimum wage workers, while in 2004, CEOs made as much as 952 minimum wage workers.

These trends are not the will of the market god. They are the result of serious imbalances in power that can and must be challenged.

(link to Times: http://www.nytimes.com/2006/04/09/business/businessspecial/09pay.html?ex=1144900800&en=86ca2f445a1ea4a7&ei=5087)



Khazouh Baszhees said...

Maybe in 2004 CEOs put in 952 times more time actually working than the average miniminimumimum-wage worker. I happen to know for a fact that the CEO of my company puts in over 750 hours every single week, busting his hiney. Whereas I myself only do a total of about fifteen minutes of actual work per week; the rest of the time at my desk is spent surfing porn and posting to blogs like this one. Find a mirror and see the true culprit.

Hoyt said...

Median CEO income was a little lower at a modest $8.4 million, up by 10.3 percent.

Hey, are you trying to make the Major League Ballplayers angry: average baseball salary is $2.9 million?