CEOs make 271 times the pay of most workers

Key Points
  • CEOs make 271 times more in average salary than the typical worker, according to a study by the Economic Policy Institute.
  • The total, while still high, is below the 376-to-1 ratio in 2000.
Leslie Moonves
John Shearer | Getty Images

The pay gap between company bigwigs and ordinary working stiffs is narrowing, but there's still a major chasm.

CEOs at the largest U.S. firms now make 271 times more than the average worker, according to calculations by the Economic Policy Institute for 2016 salary numbers. Including stock options, average pay for those at the top of the corporate ladder came to $15.6 million in the group that the EPI examined.

While the ratio is still large, it's actually on the downswing — the gap peaked at 376-to-1 in 2000 and was 286-to-1 in 2015. However, it's still "light years" from the 20-to-1 ratio in 1965 and even the 59-to-1 ratio as recently as 1989, said EPI researchers Lawrence Mishel and Jessica Schieder.

The highest-paid executive for 2016 was Marc Lore, CEO of e-commerce at Wal-Mart, who made $243.9 million, according to S&P CapitaIQ. The CEO of Alphabet's Googe, Sundar Pichai, brought in $199.7 million, while Robert J. Coury, chairman of Mylan, made $136.8 million. They were followed by Thomas Rutledge, the Charter Communications CEO, at $98.5 million, and CBS CEO Les Moonves, at $69.5 million.

"Regardless of how it's measured, CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pay," Mishel and Schieder wrote. "Exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers, since the higher CEO pay does not reflect correspondingly higher output."

The authors point out that CEO pay has grown far more quickly than corporate profits.

"This means that CEOs are getting more because of their power to set pay, not because they are more productive or have special talent or have more education," they said. "If CEOs earned less or were taxed more, there would be no adverse impact on output or employment."

What can be done?

The institute recommends raising tax levels for top earners, getting rid of tax incentives for performance, tax firms more that have higher CEO-to-worker pay gaps and encourage shareholders to exercise more "say on pay" for corporate executive salaries.

President Donald Trump has pledged to push tax reform through Congress, and it's possible that the top tax rates actually could fall. However, that could come with broad-based tightening of the loopholes that allow top earners to avoid paying that high level.

The EPI study points out that CEO pay has coincided with the behavior of the stock market. Stocks are on the rise again in 2017, indicating that wage disparities are likely to remain pronounced.

Since 2007, "income growth has remained unbalanced: as profits have reached record highs along with stock market highs, the wages of most workers have continued to stagnate in the 2000s though there have been inflation-adjusted gains in the last two years," the EPI report said.

Slow wage growth has been a vexing problem for policymakers, particularly those at the Federal Reserve. The U.S. central bank has held interest rates low as wage gains and inflation broadly have remained below the Fed's targets. Economists are divided on whether wages will pick up in a labor market with a 4.4 percent unemployment rate — beneath what is often considered full employment.

Correction: Sundar Pichai is CEO of Google. An earlier version misstated the company's name.

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