CEOs are sure feeling the wealth over the past five decades.
Between 1978 and 2020, CEO pay has skyrocketed by a whopping 1,322% — but the wages of workers lag way behind, according to a new report.
The Economic Policy Institute recently compiled research looking at compensation packages of top executives finding that the wage gap between the typical employee and company leaders is massive. During that same time period, the report found that the average worker only saw their compensation grow by 18%.
The wage difference is a stunning discrepancy as more workers flee jobs despite companies offering better wages; businesses are struggling to attract workers back to the office in what has been deemed “The Great Resignation of 2021.”
Explaining the rise in CEO pay
In 2020, a CEO at one of the top 350 firms in the US raked in $24.2 million on average, according to the report. It was an 18.9% increase from 2019, which might come as a surprise since the pandemic leveled hiring and company growth plans.
“CEOs are getting more because of their power to set pay and because so much of their pay (more than 80%) is stock-related, not because they are increasing their productivity or possess specific, high-demand skills,” the report said.
Their pay hikes are a product of growth in vested stock awards and exercised stock options. These are often perks that top executives are offered when taking a job, also known as long-term incentive compensation. The goal of LTI’s is to retain talent for longer by personalizing benefit packages with deferred bonuses to inspire top performance.
In 2016, stock-related components of CEO compensation has risen to 83.1% of total compensation in 2020; it was at about 73.1% in 2016.
The pay inequality gap has soared in recent decades; the Economic Policy Institute said the CEO-to-worker-pay ratio was 61-to-1 in 1989, but now, CEOs at the largest public firms in the US were paid 351 times as much as the typical worker.
The highest-compensated CEOs in 2020
CEOs from S&P 500 companies made $15.5 million in total compensation last year, according to AFL-CIO’s annual Executive Paywatch report. A similar trend in pay disparity was revealed; the average worker made $43,512, an increase of $957 a year over the past decade.
Making the most in 2020 was Paycom CEO Chad Richison, who made more than $200 million in salary and stock awards, according to the study. CEOs from several notable companies, including General Electric, T-Mobile, Nike, and Adobe, all appeared in the top 10.
- Chad Richison, Paycom – $211 million
- Robert Kotick, Activision Blizzard – $154 million
- Leonard Schleifer, Regeneron Pharmaceuticals – $135 million
- Javier Rodriguez, DaVita – $73 million
- H. Culp Jr., General Electric – $73 million
- Christopher Nassetta, Hilton Worldwide Holdings – $55 million
- G. Sievert, T-Mobile US – $54 million
- John Donahoe, Nike – $53 million
- James Heppelmann, PTC – $47 million
- Shantanu Narayen, Adobe – $45 million