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Home > Blog > CEO Compensation Keeps Rising
Out of Our Minds
Saturday, May 29, 2004 9:09 AM
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.


5 comments

Rick Ethridge - 4/15/2006 9:55:40 AM
I was just watching a morning news report concearning Ceo compensation Packages. My God how can one individual be so valuable to one organization to warrant the Compensation of more than 650 Million Dollars to date. and the CEO had only been with that Company less than 10 months. these are Companies like Firestone, Goodyear, ENRON and Tyco. If the company would just use thier Board of Directors to be accountable for the Profitability of the Bottom line, Then I think they could get rid of the Perverbial CEO as they are Today. Then then the Compensation that would be saved could pay for Employee Retirement and Health Care. Just think how many Insurance Policies could be maintained with the saving to the Company by not utilizing the CEO Position. Just a Thought brought about by frustration.
Kevin Gossett - 6/2/2004 12:48:05 AM
I belive two of the biggest mistakes (and evils) in business today are:

1. The growing separation of accountability and responsibility.

and

2. Management who use layoffs and budget cuts not to protect their company's profitability, but to protect their own cash flow bonuses.

Now, #2 may seem to be in conflict with #1, but good companies should have safeguards in place to protect workers from having to pay for CEO bonuses and huge salary increases with their jobs.
Johnnie Moore - 6/1/2004 2:05:00 PM
I find this continuous aggrandisement of CEO pay dispiriting and it really has the hallmarks of 'market failure'. I wonder how they manage to reconcile their incomes with the idea of supporting teamwork and collaboration in their organisations?
Gautam - 5/31/2004 6:22:43 AM
In India we've had discussions triggered by certain leaders that there have got to be some ratio beyond which CEO salary should not rise. And figures like 1:25 of lowest pay in the organization and CEO pay have been bandied about. But in India at least (and I suspect, other countries too) there are a lot of CEO perks that never get valued in the annual report of the organization. And further complicating the scenario is the salaries of promoter-CEOs who take home pays like $ 1.8 m in India!
Halley Suitt - 5/30/2004 6:58:37 PM
Hi David = I understand that if the minimum wage had followed the arc of CEO pay over the last 20 years -- it would be $44.00/hour -- I'm checking on the source. Halley

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