Average CEO Pay Surged Nearly 1,500% Since 1978 As Workers Wages Stagnated

A new report finds that CEOs of the largest companies in the United States are earning 1,460.2 percent more than they did in 1978, when adjusted for inflation, fueling eye-popping levels of income inequality. Top CEO compensation grew roughly 37 percent faster than stock market growth during this period and far eclipsed the slow 18.1 percent growth in a typical worker’s pay. 

As the report finds, CEO pay is surging higher than productivity, so it's clear that corporate executives aren’t becoming more productive or more skilled than their workers or because of a shortage of excellent CEO candidates.

“Importantly, rising CEO pay does not reflect a rising value of skills but rather CEOs’ use of their power to set their own pay,” the EPI report states. 

This is major problem because it is a key factor in growing economic inequality. As these corporate executives horde more and more of the wealth, fewer and fewer of the gains in the economy are going to the working people who create this wealth. This means that CEO pay can be reduced without damaging overall economic growth.

"Some observers argue that exorbitant CEO compensation is merely a symbolic issue, with no consequences for the vast majority of workers," wrote Josh Bivens and Jori Kandra, the authors of the report. "However, the escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1 percent and top 0.1 percent incomes, generating widespread inequality."

 Much of the  gains for corporate executives were accumulated in the past three years as corporate profits soared during COVID pandemic while workers struggled and suffered. EPI found that "while millions lost jobs in the first year of the pandemic and suffered real wage declines due to inflation in the second year, CEOs' realized compensation jumped 30.3 percent between 2019 and 2021.” Meanwhile typical workers who remained on the job saw their compensation rise by just 3.9 percent during the same time period.

The report comes as the Federal Reserve raises interest rates to fight inflation, which could put over 1.5 million people out of work, according to its own projections.

In order to combat this egregious level of corporate greed, Bivens and Kandra recommend reinstating higher marginal income tax rates for the very top, setting corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation; using antitrust enforcement and regulation to restrain the excessive market power of CEOs and corporations; and giving shareholders more of a say in top executives’ compensation.