Other executives’ total compensation in 2019 were as follows: Phil Witherington, CFO, $5.1 million (up from $4.6 million in 2018) Rahul Joshi, COO, $6.7 million (he assumed the position in June 2019) Marianne Harrison, president and CEO, John Hancock, $6.3 million (up from $5.9 million in 2018) Private Company Compensation Authoritative, up-to-date data on the living standards of American workers. This ratio, which illustrates the increased divergence between CEO and worker pay over time, is computed in two steps. Source: Authors’ analysis of EPI State of Working America Data Library data on top 0.1% wages in Mishel and Kassa 2019; data on wages by educational attainment from the EPI State of Working America Data Library; and data on CEO compensation from an extrapolation of Kaplan’s (2012b) CEO compensation series. This first metric can be compared with the second metric, compensation granted, whose measurement is the same as in prior reports. However, the argument that CEO compensation is being set by the market for “skills” does not square with the available data corresponding to what Kaplan employed. Staff of Congressman Keith Ellison. Clifford (2017) recommends setting a cap on compensation and taxing companies on any amount over the cap, similar to the way baseball team payrolls are taxed when salaries exceed a cap. Federal Reserve Economic Data (FRED) [database]. This SEC capitulation diminished the utility of these new median worker compensation measures for making comparisons across firms and will diminish the utility of comparing the measures over time when additional years of data are available. They also earn far more than the typical worker, and their pay—which relies heavily on stock-related compensation— has grown much more rapidly than typical worker pay. Newsletter These estimates are determined using the Black Scholes model. Equity Services, Quick Reads The college-to-high-school wage ratios compare hourly wages of workers who have a college degree with hourly wages of workers who have only a high school education. That CEO compensation grew much faster than the earnings of the top 0.1% of wage earners is not because the top 0.1% did not fare well. Includes. (Kaplan 2012a, 4). The Economic Policy Institute staff is unionized with the An Examination of Pay Ratios Revealed by Dodd-Frank, from the office of former Congressman Keith Ellison (D-Minn.), “These new data give us a much clearer picture as to which corporations are sharing the wealth and which are not” (Staff of Congressman Keith Ellison 2018). In this report, we examine current trends to determine how CEOs of the top 350 largest U.S. firms (by sales) are faring compared with typical workers through 2019. Clifford served as CEO for King Broadcasting Company from 1987 to 1992 and National Mobile Television from 1992 to 2000 and has been a director of thirteen public and private companies. Note however that trends before 1995 are based on the changes in average top-company CEO and economywide private-sector production/nonsupervisory worker compensation. Compelling Visuals Copy the code below to embed this chart on your website. The compensation granted measure grew $1,148,000, or by 8.6%, to $14,487,000 in 2019. 5. Realized CEO compensation grew to $21.3 million in 2019, which was $2.6 million or 14.0% higher than in 2018. Stock awards, on the other hand, promote better alignment of a CEO’s goals with shareholders’ goals. This will capture both the rise and fall of the value of the stock awards between grant and vesting and any increase in the stock awards due to performance equity programs that award more shares for exceeding performance targets (Francis 2019, Hodak 2019). The consistent basis of the measurement of our ratios permits historical comparisons on a year-to-year basis. In … Second, our worker compensation series reflects annualized compensation (multiplying an estimate of hourly compensation by 2,080 hours), eliminating the ambiguity that arises when weeks worked and hours per week are not specified or when they differ across firms (as can be the case for the SEC ratios). The increase in performance-based pay continued this year, despite concerns about a potential reversal. Is this increase large? Fields marked with an asterisk (*) are required. Newsroom, Careers The discussion in this paragraph draws on Bivens and Mishel 2013. The ratios reported to the SEC may include workers in other countries. Moreover, as we discuss, the appropriate comparison is to other earners, not to households, which could have multiple earners and shifts in the number of earners over time. We also compare top CEO pay with earnings of workers in the top 0.1% (through 2018), and look at the relationship between CEO pay and the stock market. More explanation of this measurement change and the impact on measured trends is provided in the Appendix, “Revising the stock awards component of our CEO compensation measure.”, Note that Table 1 provides a projection for data for 2019. 9. The compensation policy and programs are designed to reward performance, sustainable growth and long-term shareholder value creation, while offering competitive remuneration to be able to attract and retain highly qualified employees. Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real 2015. This not only promotes economic efficiency and competition, but might help restrain executive pay as well. In 2019, Elon Musk, CEO of Tesla, was the highest paid executive with $595.3 million, according to the Bloomberg Pay Index. It recovered to 217-to-1 by 2014 and, after dipping a bit over the next three years, ended back up at 212-to-1 in 2018 before rising to 223-to-1 with the strong 8.6% growth of CEO granted compensation in 2019. It surged in the 1990s, hitting 366-to-1 in 2000, at the end of the 1990s recovery and at the height of the stock market bubble.9 The fall in the stock market after 2000 reduced CEO stock-related pay such as realized stock options and caused CEO compensation to tumble in 2002 before beginning to rise again in 2003. 1 of Nestlé’s Articles of Association, the General Meeting shall approve annually the proposal of the Board of Directors in relation to the maximum The inflation-adjusted annual earnings of the top 0.1% grew 337% from 1978 to 2018 (Mishel and Kassa 2019). The normally tight relationship between overall stock prices and CEO compensation, as shown in Figure A, casts doubt on the theory that CEOs are enjoying high and rising pay because their individual productivity is increasing (e.g., because they head larger firms, have adopted new technology, or for other reasons). In a follow-up paper for the Cato Institute, published as a National Bureau of Economic Research working paper, Kaplan expands this point: The point of these comparisons is to confirm that while public company CEOs earn a great deal, they are not unique. It shows the average compensation of CEOs at the 350 largest publicly owned U.S. firms (i.e., firms that sell stock on the open market) by revenue.3 To analyze current trends, we use two measures of compensation, one based on compensation “granted” and the other based on compensation as “realized.” Both measures include the same measures of salary, bonuses, and long-term incentive payouts (columns 3, 4 and 5). CEO compensation grew far faster than compensation of very highly paid workers over the last few decades, which suggests that the market for skills was not responsible for the rapid growth of CEO compensation. Hall, Brian J., and Jeffrey B. Liebman. The last two columns in Table 2 show the resulting ratio for both measures of CEO pay. The stock-related components of CEO compensation constitute a large and increasing share of total compensation: realized stock awards and stock options (column 10) were 73.1% of total compensation in 2016 and 78.6% in 2019. 2. Table 2 presents the longer-term trends in CEO compensation for selected years from 1965 to 2019 using the same two measures used in Table 1.7. See who made the most-and the least-in WSJ's annual pay ranking. Phone: 202-775-8810 • epi@epi.org Now, in our realized CEO compensation measure, we are using a realized value measure of stock awards which reflects the value of stock awards when vested. 21bis par. A February 2019 Equilar analysis, Companies Shift CEO Pay Mix Following Multiple Say on Pay Failures, found that “The average CEO total compensation at companies that failed Say on Pay (shareholder votes) decreased significantly from 2011 to 2017, a total of 44.9% over that time frame.”1 Yet overall CEO pay continues to increase. 2014; Gould 2020b). In 2019, a CEO at one of the top 350 firms in the U.S. was paid $21.3 million on average (using a “realized” measure of CEO pay that counts stock awards when vested and stock options when cashed in rather than when granted). A similar process is used to calculate the projected full-year 2019 value of exercised stock options. Compensation Surveys 2010. Using a different “granted” measure of CEO pay, average top CEO compensation was $14.5 million in 2019. Economic Policy Institute Briefing Paper no. The 9,692 executives in publicly held firms who were in the top 0.1% of wage earners had average annual earnings of $4.4 million. 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