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CEO pay in last four decades grew 940.3% while average worker up 11.9%

Patrick Kennedy, Star Tribune (Minneapolis) on

Published in Business News

CEO pay in the last four decades has grown 940.3% while the pay of an average worker increased 11.9% over the same time period.

That is what the Economic Policy Institute, a nonprofit think tank based in Washington, D.C., that focuses on the low- and middle-income Americans, found in a study released last week.

The study's authors tracked CEO pay beginning in 1978. They found compensation took off in the 1990s, peaked in 2000 and has fluctuated since, most notably around the burst of the dot-com bubble in the early 2000s and around the recession of 2008 and 2009.

Still, the study found growth in CEO pay since 1978 far exceeds that of private-sector workers, and its authors offered some suggestions on how to limit executive-pay growth.

"In our view, the CEO compensation and escalation is not reflective of some big gaining of skills or improved contribution to their firm's performance or the economy," said co-author Lawrence Mishel, a distinguished fellow with the Economic Policy Institute. "That means we could tax away half of what they take in, and I think the economy would be the same size."

Since stock options make up the bulk of CEO pay at large companies, the study looked at two ways to measure options. One includes stock options realized and the other the value of stock options granted. Under either methodology, CEO pay gains far outpaced those of average workers.

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Total pay includes salary, bonuses, stock awards and long-term incentive payouts.

The report found that CEO pay at the 350 largest public companies from 1978 to 2018 has grown more than 1,000%, or 940.3% when exercised options are counted.

That's far above the performance of the S&P 500, a good proxy for the overall stock market, which grew 706.7% during that time. In 2018, average CEO pay was $17.2 million, down 0.5% from the previous year.

The typical worker's wages grew 11.9% from 1978 to 2018, from $50,300 to $56,200. The difference between the largest company CEOs and the typical worker underscores growing income inequality in the United States, the study said.

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