America’s Top CEOs Earn 278 Times More Than Their Employees. Should We worry?

The average chief executive makes 278 times the pay of a typical company employee, according to a new study by the Economic Policy Institute, which analyzed executive pay between 1978 to 2018.

The study found that in 2018, Chief executives at the US’s top 350 companies were earning an average of $17.2 million. Chief executive compensation rose by 7.1% in 2018 and 9.2% in 2017.

CEOs make over 1,007.5% (or more conservatively, 940.3 percent) more than they did 40 years ago (1978), compared to the 11.9% pay increase for the average company employee, adjusted for inflation, survey finds.

• In 1965, the CEO-to-worker pay ratio was 20-to-1 for options realized and 16-to-1 for options granted.
• In 1978, the CEO-to-worker pay ratio was 30-to-1 for options realized and 23-to-1 for options granted.
• In 2000, the CEO-to-worker pay ratio was 368-to-1 for options realized and 386-to-1 for options granted.

The study comes as some of the wealthiest and influential business people in the US have publicly worried about growing income inequality.

Hedge fund titan Ray Dalio, founder of Bridgewater Associates, the world’s biggest hedge fund, and a man worth about $16.9 billion, according to the CEOWORLD magazine Rich List Index, became the latest in a bank of billionaires to go public about his fears of widening income inequality.

Jamie Dimon, JP Morgan’s chief executive, has called for a “Marshall plan” to address a “systemic problem” that had left half of society “severely disadvantaged.” Jamie Dimon ranked No. 35 in the CEOWORLD magazine’s ranking of the most influential CEOs in the world 2019.

Income “insufficiency,” not inequality, is to blame for the widening gap between rich and poor, according to Steve Schwarzman, CEO of Blackstone Steve Schwarzman, who CEOWORLD magazine Rich List Index estimates to be worth $15.8 billion.

Some of the top-paid CEOs include Discovery Chief David Zaslav ($129.5 million), Oracle’s Lawrence Ellison ($108.9 million), T-Mobile CEO John Legere ($66.5 million), Disney Chairman and CEO Robert Iger ($65.6 million), and News Corp’s Lachlan Murdoch ($50.7 million).

On the other hand, Carol Roth, CEO of Intercap Merchant Partners, told CNBC “Nobody gets upset that Steph Curry or Beyonce makes a certain amount of money, but the person who is an usher at the stadium makes a fraction of what they made.” “So I don’t understand why there is any comparison between what a CEO makes, and a quote-unquote average worker makes.”

“The CEO is not getting paid at the expense of workers,” Roth added. “The workers are making what they make because that’s the market rate. If the CEO didn’t get paid that much, it’s not that the workers would get paid more. That money would go somewhere else.”

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