Chart o’ the Day: CEO-to-Worker Compensation is Hilarious (again)

You’ll notice something highly obvious in the below chart – the ratio between CEO compensation and average employee compensation tends to spike during stock market booms – this is, of course, related to the fact that execs take stock and options while most worker pay is in the cash they actually need to, um, live.

But just because there’s an explanation, that doesn’t change the sheer extremity of the thing…

From an in-depth exploration of this topic at the Economic Policy Institute, here’s the fascinating chart of this ratio:

Screen Shot 2014-06-12 at 3.52.01 PM

 

U.S. CEOs of major companies earned 20 times more than a typical worker in 1965; this ratio grew to 29.9-to-1 in 1978 and 58.7-to-1 by 1989 and then surged in the 1990s to hit 383.4-to-1 by the end of the 1990s recovery in 2000. The fall in the stock market after 2000 reduced CEO stock-related pay (e.g., options) and caused CEO compensation to tumble until 2002 and 2003. CEO compensation recovered to a level of 351.3 times worker pay by 2007, almost back to its 2000 level. The financial crisis in 2008 and accompanying stock market decline reduced CEO compensation after 2007–2008, as discussed above, and the CEO-to-worker compensation ratio fell in tandem. By 2013, the stock market had recouped all of the value it lost following the financial crisis. Similarly, CEO compensation has grown from its 2009 low, and the CEO-to-worker compensation ratio in 2013 had recovered to 295.9-to-1. Though the CEO-to-worker compensation ratio remains below its peak values achieved earlier in the 2000s, it is far higher than what prevailed through the 1960s, 1970s, 1980s, and 1990s. If Facebook were included in our sample, the CEO-to-worker compensation ratio in 2013 would have been 510.7-to-1.

 

I’m not arguing whether it’s “wrong” or “right”, but I will take a stand and say it’s not good for the economy. There’s nothing wrong with people having the ability to make as much as they want, if only it didn’t have to take place so narrowly at the highest strata.

Source:

CEO Pay Continues to Rise as Typical Workers Are Paid Less (Economic Policy Institute)

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. tangerine business account sign-in commented on Jan 16

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2014/06/13/chart-o-the-day-ceo-to-worker-compensation-is-hilarious-again/ […]

  2. Kicker ST1000 manuals commented on Jan 23

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2014/06/13/chart-o-the-day-ceo-to-worker-compensation-is-hilarious-again/ […]