CEO Compensation Keeps Rising
David Batstone on Business
In 1980, the average CEO of a large firm made 42 times as much as non-supervisory workers. At the time, Peter Drucker warned that such a large pay gap might compromise the integrity of corporate leadership. In short, it makes a mockery of the role of all the other workers in making the company hum.
Evidently no one at the top of the corporate ladder was listening. By 1995, the ratio of inequality between the shop floor and the executive suite had increased to a multiple of 160. Then over the next five years CEO compensation went through the roof; in 2000, they were paid 458 times as much as ordinary workers.
At least now the tide has moved back from the excess of the 1990s, right? Wrong.
A new report reveals that CEO total compensation in the S&P 500 rose by a median of 27.16 percent in 2003, nearly three times the rise seen for 2002, when total compensation rose a healthy 11.48 percent. Every element of pay tracked (base salary, annual compensation, restricted stock and other long-term incentives) rose in value over the last year save one: the value realized from the exercise of stock options actually fell, by a median of 1.01 percent.
What is worse than mockery? Disdain. That's exactly how many rank-and-file workers feel they are being treated. Over the past several years, workers have seen their pay packages hold steady, if not decline.
Defenders of generous executive pay packages like to point out that other highly talented individuals - such as sports superstars and entertainers - rake in otherworldly compensation as well. But at least athletes and actors are paid on the basis of their performance.