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
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
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: Source: http://www.epi.org
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