Money

CEOs made an average of $843,000 in 1965—here's how much they earn today

Tim Cook was the second highest-paid executive of 2016, pulling in $150,036,907
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Tim Cook was the second highest-paid executive of 2016, pulling in $150,036,907

It pays to be CEO. Even in 1965, chief executive officers were pulling in $843,000 a year, and their compensation has only skyrocketed since.

According to a new report from the left-leaning Economic Policy Institute (EPI), CEO pay peaked in 2000 at $20.7 million (in 2016 dollars) and, in 2016, "CEOs in America's largest firms made an average of $15.6 million in compensation, or 271 times the annual average pay of the typical worker."

That's "5.33 times greater than wages of the top 0.1 percent of wage earners," the EPI reports.

The EPI looked at the 350 largest U.S. firms and used two measures of compensation: One measure includes stock options realized, while the other includes value of stock options granted. The options-realized measure "reflects the value of options exercised that CEOs report on their Form W-2 wages and is what they actually earned in a given year," the EPI explains. The second measure "includes the value of the stock options granted in the relevant year and is not influenced by CEOs' decisions to cash or not cash in their options during that year."

Both measures also include salary, bonuses, restricted stock grants and long-term incentive payouts.

"By either measure CEO compensation is very high relative to the compensation of a typical worker or even that of an earner in the top 0.1 percent, and it has grown far faster than stock prices or corporate profits," reports the EPI.

Just how fast has pay grown?

Here's the average annual CEO compensation for various years starting in 1965. CEO pay is represented in 2016 dollars.

1965

CEO annual compensation based on options realized: $843,000
CEO annual compensation based on options granted: $800,000

1973

CEO annual compensation based on options realized: $1,102,000
CEO annual compensation based on options granted: $1,046,000

1989

CEO annual compensation based on options realized: $2,808,000
CEO annual compensation based on options granted: $2,664,000

Warren Buffett and Bill Gates speak at Columbia Business School
Spencer Platt | Getty Images
Warren Buffett and Bill Gates speak at Columbia Business School

1995

CEO annual compensation based on options realized: $5,947,000
CEO annual compensation based on options granted: $6,595,000

2000

CEO annual compensation based on options realized: $20,664,000
CEO annual compensation based on options granted: $21,313,000

2009

CEO annual compensation based on options realized: $10,746,000
CEO annual compensation based on options granted: $10,341,000

Elon Musk, Co-founder and CEO of Tesla
Bloomberg | Getty Images
Elon Musk, Co-founder and CEO of Tesla

2014

CEO annual compensation based on options realized: $16,569,000
CEO annual compensation based on options granted: $12,469,000

2015

CEO annual compensation based on options realized: $16,341,000
CEO annual compensation based on options granted: $12,496,000

2016 (projection)

CEO annual compensation based on options realized: $15,636,000
CEO annual compensation based on options granted: $12,970,000

Here's the full chart from the EPI's report:

CEO compensation, CEO-to-worker compensation ratio, and stock prices (2016 dollars), 1965–2016

 
CEO annual compensation (in thousands)
 
Worker annual compensation (in thousands)
 
Stock market (adjusted to 2016)
 
CEO-to-worker compensation ratio
 
  Based on options realized Based on options granted Private-sector production/nonsupervisory workers Firms industry S&P 500 Dow Jones Based on options realized Based on options granted
1965 $843 $800 $40.00 n/a 587 6,066 20.2 18.4
1973 $1,102 $1,046 $46.90 n/a 519 4,464 22.5 20.5
1978 $1,508 $1,431 $48.00 n/a 325 2,774 30.1 27.4
1989 $2,808 $2,664 $45.60 n/a 604 4,694 58.9 53.7
1995 $5,947 $6,595 $45.70 $53.10 848 7,042 122.6 136.8
2000 $20,664 $21,313 $48.30 $56.00 1,989 14,947 376.1 411.3
2007 $19,112 $13,282 $50.20 $56.00 1,710 15,255 347.5 240.8
2009 $10,746 $10,341 $52.20 $58.20 1,061 9,941 196.6 183.9
2010 $12,827 $11,677 $52.40 $59.00 1,255 11,744 230.3 206.3
2011 $12,958 $11,997 $51.80 $58.70 1,353 12,760 232.7 213.2
2012 $15,261 $11,587 $51.40 $58.30 1,442 13,554 281.5 209.8
2013 $15,603 $11,986 $51.70 $58.50 1,694 15,465 291.8 214.5
2014 $16,569 $12,469 $51.90 $58.80 1,958 17,011 298.7 224.5
2015 $16,341 $12,496 $52.70 $59.70 2,087 17,810 286.1 219.7
2015 (June 2016) $15,699 $12,173 $52.90 $59.20 2,087 17,810 275.4 215.4
2016 (June 2017) $15,021 $12,636 $53.30 $60.80 2,095 17,927 259.8 218
2016(projection) $15,636 $12,970 $53.30 $60.80 2,095 17,927 270.5 223.8
                 
Percent change             Change in ratio  
1965-1978 78.90% 78.90% 19.90% n/a -44.70% -54.30% 9.9 9
1978-2000 1270.10% 1389.50% 0.60% n/a 512.70% 438.80% 346 383.9
2000-2016 -24.30% -39.10% 10.50% 8.50% 5.30% 19.90% -105.6 -187.5
2009-2016 45.50% 25.40% 2.20% 4.50% 97.50% 80.30% 73.9 39.9
1978-2016 936.70% 806.50% 11.20% n/a 545.20% 546.30% 240.4 196.4
Source: http://www.epi.org