Executive Pay Spiraling Upward As Corporations Race To Pay Their Bosses The Most
The American economy may be faltering, but corporate executives needn't worry: Regardless of how well they perform, each one of them stands a good chance of getting paid as much as all the others -- if not more.
That's because of a practice known as "peer benchmarking" -- a widely used method wherein corporations set pay for their executives at or above the median level of, well, other executives. No company wants their top brass leaving for another job with better pay, so executives are often compensated not based on how well they do, but on how much their competitors in the industry make.
The result? Salaries at the top are inching higher all the time, according to research cited by the Washington Post.
The financial crisis and subsequent worldwide economic slowdown haven't stopped executives from taking home bigger paychecks, both in salaries and bonuses. In 2010, JPMorgan CEO Jamie Dimon received a pay raise of more than $19 million, while Lloyd Blankfen, CEO of Goldman Sachs, collected an additional $3.6 million in bonuses and saw his salary more than triple.
In general, executive salaries have grown far faster than the incomes of average workers in the years since the crisis. Median CEO compensation pay rose by 27 percent in 2010, compared with an increase of just 2.1 percent for workers.
Such figures suggest that the prevalence of peer benchmarking, as outlined in a recent Washington Post article, may play an important role in the United States' ever-widening wealth gap.
Recent studies have shown that the richest 1 percent of Americans control about 24 percent of the country's wealth -- an imbalance that has grown especially pronounced in recent decades, as the salaries of the affluent climbed higher and higher while middle- and lower-class incomes became more or less stagnant.
The growing distance between America's wealthiest citizens and its poorest -- of whom there are more than ever before, with a record 46.2 million people counted in poverty last year -- may be contributing to the frustrating slowness of the economic recovery.
Even though the recession officially ended two years ago, the U.S. has added few new jobs and growth has slowed to a near-standstill.
The high levels of income inequality may have something to do with that. A recent study shows that countries with a more equitable income distribution tend to have longer periods of economic growth -- and that "more inequality lowers growth," in the words of one of the study's authors.
The wealth discrepancy has been cited as one of the principal grievances of the Occupy Wall Street movement, a grassroots protest that began in lower Manhattan's Financial District last month and has since spread to more than 100 cities.
The participants of Occupy Wall Street, more than 700 of whom were arrested during a march over the Brooklyn Bridge this weekend, have called for a more fair distribution of wealth, as well as greater repercussions for the banks at the center of the financial crisis and the end of corporate influence in the political process.
Nor are concerns over income inequality limited to the Wall Street protesters. A recent poll found that the number of Americans who see the country as divided between affluent "haves" and struggling "have-nots" rose in 2011 for the second year in a row.