BUSINESS: Average CEO Now Receives 431 Times the Average Worker's Wage

Chief Executive Officers all across the country have every reason to celebrate. The average CEO in America now out-earns the average worker by a ratio of 431 to 1. This is up substantially from last year's high of 301 to 1.



Not surprising, but acutely nauseating nonetheless. I've seen firsthand the corporate world of mergers, options, severance scandals, bankruptcy, the works. I road the startup rollercoaster for five years, going through three mergers, before my better instincts kicked in and I jumped ship. Soon after they went belly up, sucked dry of cash by one man, and bankrupted by his incompetence and greed. My coworkers didn't even get paid out for their vacation time, or for their severance. Meanwhile the incompetent schmuck of a CEO got 7 point something million dollars upon leaving, for doing ABSOLUTELY NOTHING positive whatsoever. The man whose decisions were solely responsible for bringing the company to its knees, dealth the coup de grace with his severance package. He ran the company into the ground and made off like a bandit.

The hardest, most dangerous jobs pay the least, while the easiest, safest jobs pay the most. This sort of 'logic' is what makes our society feel so upside down! It's this backwards thinking that makes people question the authenticity of reality. Quicky Mart clerks get shot every day, working for 6 bucks an hour or less, and these corporate bastards are rolling in money, with the most dangerous part of their day being the morning commute.

Reform is necessary to avoid revolution. Either way, it doesn't effect me, but if the suits want to keep their suits intact, and their necks for that matter, I suggest they shape up and spread the wealth around a little. We're living in hard times, getting harder. Either we all pull together, or it's every man for himself. The historical record shows the results of an underpaid, abused, neglected underclass. Either the kings and kingmakers change society of their own volition, or the people will initiate that change, to the detriment of those in power currently. Simple as that.

[edit on 5-9-2005 by WyrdeOne]

It's why I see capatilism as outdated. When you see the figures, they don't add up. It's not a fair system, it's not working and we put up with it. Why, I don't know. You read these stories day in day out, and apart from the "Dew dew dew, what a greedy man", nothing is ever said, and nothing ever changes.

It amazes me that we all think we are intelligent, yet we sit idly and watch Golden Handshakes make fools of us all.

Makes me wonder what the impact really would be Social Security funding if they lifted the wage cap on contributions. Does anyone really need that kind of money? Would they even miss it in their day to day life? Would it "hurt"?

I think we should have a rule that says that whatever the CEO makes a year, the employees must make at least, say, one percent of that. So if a CEO made 1 million dollars a year, their employees must make at least 10,000.

chebob
Yeah, it's pretty amazing. The reason is clear, comfort. People don't want to sacrifice the little bit of comfort they have, for fear of losing it. Even the possibility of greater gain can't motivate them, because they're so enamored with their lovely golden handcuffs.

In the end it comes down to pesonal responsibility. We're all responsible for the situation we're in, and we're all responsible for our own decisions. If people won't take back their lives, they are doomed to live this way.

relentless
Social security would probably function perfectly if it didn't exist. My point is that individuals are much more capable of handling their money and seeing themselves through to retirement. The Federal government is bad with money, so I think it's best to keep as much of it as possible out of their hands.

curme
I don't know the solution, but I'm fairly confident in my own ability to survive. The problem is oftentimes too many people rely on this government, and inevitably get let down. We could be like the Japanese, and hand over 60% of our pay to the government, but then we damn well better see results, not just increased CEO pay scales.

Some countries have managed to raise taxes to incredible levels, but if they offer medical coverage, education, and retirement in exchange, it's not such a bad trade. I'm just thinking that if we give all our money to the government in this day and age, we'll have nothing to show for it ten years from now.

They haven't proven themselves trustworthy.

If I was a big earner, I would help out the people I could, my friends and familiy, but I would be uncomfortable donating huge amounts of money to the sinking ship of state, via income taxes. It would seem like flushing money down the toilet, seeing all the good it does.

The only thing that can fix the situation is responsible government, and responsible citizens. If people take care of themselves and each other, the need for the government as a nanny is eliminated, and the need for the state in general is greatly diminshed.

That article is purposely misleading. Only about 400 companies were actually looked at--the largest in the country. While the figure is high, it in no way is representative of the income of the "average" CEO, rather, it represents the average of the highest paid CEOs in the nation relative to the average "non professional" worker. It is a little like looking at the income of the top 400 Doctors in the country and then claiming their average income is the average for all doctors in the country. The newspaper article cited is not news at all, it is a political statement.

[edit on 5-9-2005 by Astronomer68]

Do you have a study with a larger data set astronomer? I'd like to see it.

You work with the numbers you've got.

Technically speaking you're right, it isn't the average of all CEOs. It is, nonetheless, illuminating as to the gap between rich and poor which appears to be continually widening.

No, I don't. Probably Fortune magazine, or at least their archives do, however. I won't argue against your 2nd point--the widening gap between rich & poor, but I don't think the cited article is the proper way to get into that subject. A clever researcher should be able to look at IRS figures, the number of people whose net worth is above some threshold, etc., and come up with some real data that would make your point.

[edit on 5-9-2005 by Astronomer68]

That's a good point Astronomer.

But it still begs the question, why are these 400 people paid so much?

There's only 24 hours in a day, and in my experience they work about as many hours as everyone else.

Is it because they are smarter?
The crème de la crème?

Even if they are, this fits in with profesionnal sports players and celebrities in general. How much is enough?

We are all contributing to this society and some go without, left to fend for themselves.
.

Here's something to add to the discussion. Politically active CEOs increased their earnings by 52% last year, among the top 356 companies, according to this link.
www.faireconomy.org...

Political contributions also appear to pay off. CEOs of the 69 companies that sponsored this summer’s Democratic and Republican National Conventions saw their pay jump 52 percent in 2003, far outpacing the 9 percent raise for the average large company CEO. Similarly, the 38 CEOs who have personally raised at least $100,000 for either the Bush or Kerry presidential campaigns earned an average of $15.2 million in 2003, 88 percent more than the average large company CEO.

So, it's the average large company CEO, that would have been a better way for the article I originally posted to state the situation. Still interesting though, for purposes of comparison to the average worker's wage.

Here's more. The history of CEO pay is fascinating. Check this out.
management.about.com...

According to Business Week, the average CEO of a major corporation made 42 times the average hourly worker's pay in 1980. By 1990 that had almost doubled to 85 times. In 2000, the average CEO salary reached an unbelievable 531 times that of the average hourly worker.

Interesting isn't it? Doubled in ten years, then three times that increase, and now we're down signifigantly through the first half of the next decade. After the orgiastic aptmosphere of the business world in the late 90's, it was a downward rollercoaster, and now climbing again.

Good times had by all. Kindly utilize the vomit bags provided for you.

Gools, I know of only one way to measure the worth of any person to their company and that is by looking at contributed profit. How much profit does a person bring into the company -vs- how much does that person cost us. If the answer comes up with a positive number, the the person is worth what they are being paid and if not, then cut their pay or get someone else. It is unfortunate that the people making the "worth" assessments are all from the ranks of the highly paid, but then that is the way the system is set up.

It's more so they are friends with each other.

They call it the Old Boys Network.

We deicde how much you get paid, you decide how much we do.
I scratch your back you scratch mine and let's shaft the company and people as best we can.

Logically, if you pay the workers more they will work harder and enjoy the job more. This in turn boosts production, sales, whatever and more profit comes through your doors...

Astronomer... then you need to figure out if they are honestly the ones brining the profit or are they (and I expect is the standard) taking credit for everyone elses work? Do you guys know of companies where the percentage increase in profits matches the percentage increase in pay of the CEO?

It's impossible to corrolate a CEOs presence with increased profits. There are thousands of other factors that need to be considered. The same problems arise with quantifying advertising efficacy. It's very, very difficult to draw conclusions about the cause of a thing just by studying one variable, the ad (or the CEO).

This is a convenient excuse to remove money from the company and place it in the hands of pivate individuals. They move from company to company, collecting fat severance checks every time they move on. It's a pretty common occurence in the business world, CEO swapping that is.

The example I gave earlier from my own experience is at least one case where a CEO was rewarded despite the terrible performance of the company while it was under his control. The man's policies and decisions expedited the death of the company, and still he was compensated with millions of dollars and huge fringe benefits in terms of stock options.

This sort of thing is not limited to one company, or one CEO. It's quite common.

the country's lowest-paid workers would be earning $23.03 an hour

Well, that might be close to a living wage. Lord knows the only reason I'm making it by on my wages (much lower than that) is the fact that I was lucky enough to find a VERY good deal on housing, and only live a mile from work. If not for that, I would have been homeless a long time ago, and I make well over the minimum wage. As it is, I have frivolous expenses cut to a minimum - no cable TV, no central air - I pay for phone, internet, water, and gas/electric. If I was making that $23.03/hr, I might be able to sustain myself in a place I actually like, rather than this s***hole I'm in now, not to mention, live like a civilized human, rather than getting by from paycheck to paycheck, wondering if I'm going to be able to pay for gas and electric next month.

WyrdeOne I'll grant that abuses exist in the business world and some of those abuses pertain to executive compensation. However, such abuses are not widespread. The business world tends to be a pretty unforgiving place and anything that effects the bottom line negatively doesn't usually last very long. Inefficient, unprofitable companies tend to either go belly up or get bought out and the management teams thrown out.

If the CEO of a large company engineers the buyout of a competitor company and thereby reduces costs for advertising, personnel benefits, insurance, personnel, etc. and at the same time company sales go up and the net value of the corporation increases by say 500 million dollars, then I believe that particular CEO & his management team are worth a lot and huge compensation packages would not be out of line with their contribution.

The same could be said for a new management team that came in and cut losses by huge amounts. The point is that some CEOs are worth every penny they make and I don't begrudge them the money. Others can be living on past glory and just now cashing in stock options, etc. that were granted in the past, and again I don't begrudge them the money.

Others however are sometimes grossly overpaid. Sometimes because they negotiated a great contract when the came aboard and simply never delivered the goods. Still others write poison pills into company bylaws so they can make a killing if the company ever gets taken over. Some cheat and steal and lie to make it seem they are doing a great job even when they aren't. The bad apples though don't tend to last very long. As I said earlier, it is a very unforgiving environment.

Astronomer68 you have a valid point with the dataset but at the very least the 43% increase from the same figures last year indicate that something very wrong is occuring.

From that data its safe to say that the top American CEO's have a disgustingly high rate of increase in their salaries in the past 12 months. Any pay increase of 43% is too high for any occupation if you ask me. If nurses had a pay increase of 43% per annum the economy couldnt support it, to a lesser extent I dont think the economy can support these increases.

The money supply is finite and the vast majority of the wealth is in the hands of the very, very few megarich.

Nice post, very important point there


Yes the poverty gap has had some extensive work done to it these last years.... widening it no end!

Well if it were up to me CEO's would only be allowed to be paid ten times as much as the lowest paid full time workers in the company. I find that these figures are absolutley outrageous, now sure this may not be a good average, but how much do they really need.

After all we've got single supporting families off of miniumum wage for doing back breaking work. Then we have CEO's who get paid millions to play darts, sign papers, sit through meetings and get a nice big serverence check. Does it really make sense that the CEO's, who do so much less work get paid so much more? Does it make sense that CEO's get paid millions in severence for screwing over the employees?

Look at the situation with United Airlines. The CEO's there have been raking in millions of dollars, getting massive severence fee's while driving the company into the ground. And here the same executives want to start cutting the mechanic's pensions left and right. To be honest I find it scary that CEO's want to piss off the guys that fix the airplanes. I remember hearing that the time the mechanics had a major strike (years ago I believe) an airplane crashed during the strike due to a mistake the regular mechanics would have caught. In my opinion playing with the finances of the backbone of your company is just flat out dangerous. Disgrunteled employees are not beneficial to your company.

Ever notice that socialist countries have some capitalist stuff throw in, in order to make it work? I bet you never noticed how capitalists countries (like the US) have some socialist stuff throw in. Some how, maybe it's a throw-back from the cold war mentality, but socialism has become a bad word.

No system is perfect and Ayn Rand is not the answer. The US is a young country, and it's growing pains are apparent. The scars from our stretch marks are the Americans who struggle to survive each and every day. We need to stop the knee-jerk reactions towards how to deal with society, and figure out how to make our country better.

i.e. Stop letting the corporatists run our country!