Top CEOs Earn More Than 300 Times What Average Workers Do, Study Finds

06/22/2015 01:51 pm ET | Updated Jun 22, 2015

CEOs at top U.S. companies earned more than 300 times what average workers did in 2014, a new study revealed on Monday.

According to the report by the Economic Policy Institute, CEOs of the top 350 publicly owned U.S. companies earned, on average, $16.3 million a year -- 303.4 times more than the average worker earned in 2014.

The ratio of CEO-to-average worker pay is up 244.7 percent since 1965, when it was 20-to-1, the report states. It is down, however, from a 2000 peak of about 376-to-1.

The Economic Policy Institute attributes the sharp increase in the ratio of CEO-to-average worker pay to skyrocketing CEO compensation even as average worker pay has stagnated. Since 1978, when pay packages began to rise more dramatically, CEO compensation has gone up 997 percent, even as the average worker pay has risen 10.9 percent in the same period.

The study compared total CEO compensation, including stock options, bonuses and other non-salary compensation, at the 350 firms with the highest revenue in 2014, with the average pay received by non-managerial workers in the main industries represented in those firms.

The report’s co-authors, Lawrence Mishel and Alyssa Davis, say this disproportionate rise in CEO pay is a leading contributor to income inequality.

“CEO pay is not a symbolic issue -- it has real consequences for the vast majority of wage earners. The rising pay of executives reflects wages that could have otherwise gone to workers and has fueled inequality in the United States,” Davis said in a statement.

Defenders of CEO pay argue that the pay packages reflect market demand for CEOs’ skills. They say the pay of other skilled professionals has also gone up in recent decades with rising demand for their skills.

But the Economic Policy Institute report points out that CEO compensation has far outpaced pay increases among the top 0.1 percent of wage earners, indicating that it is a market inefficiency -- the result of so-called rent seeking -- rather than a reward for unique skills. In 2013, the study calculates, CEO compensation was nearly 6 times that of the top 0.1 percent of wage earners.

In recent years, the Obama administration and Democrats in Congress have targeted CEO pay they deem excessive with stricter disclosure rules. In April, the SEC proposed uniform new requirements for corporate boards to share CEO pay information with shareholders. The new rules would streamline reporting mandated by the 2010 Dodd-Frank financial regulatory reform law.

The Economic Policy Institute endorses so-called say-on-pay rules of the kind proposed by the SEC. It is also calling for additional measures to curb CEO pay, such as higher marginal income tax rates, elimination of a tax break for executive performance pay, and levying higher taxes on companies with higher CEO-to-average worker pay ratios.

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