CEO earnings climbed to an average of more than $21 million in 2019 and could potentially still rise this year despite the coronavirus pandemic and its resulting economic downturn, according to a report released Tuesday.
The Economic Policy Institute (EPI), a left-leaning think tank, published a report that found CEO pay reached its highest point in seven years last year. A CEO at one of the top 350 companies in the U.S. was paid an average of $21.3 million — a 14 percent increase since 2018.
The researchers attribute the rise to “rapid growth in vested stock awards and exercised stock options tied to stock market growth.”
The CEO-to-worker compensation ratio amounted to 320-to-1 with the institute’s calculations, a rise from 2018’s 293-to-1 ratio and a surge from 1989’s 61-to-1 ratio.
For these statistics, the institute used a “realized” compensation that includes stock awards when they are vested and stock options when they are cashed. When the institute used the grant compensation measure, the average CEO compensation rose by 8.6 percent to $14.5 million from 2018 to 2019.
The EPI’s annual report found that CEO compensation when adjusted for inflation increased by 1,167 percent between 1978 and 2019. The increase was much more than the top 0.1 percent of wage earners, whose paychecks jumped 337 percent between 1978 and 2018, the most recent year of available data.
In the meantime, the typical worker’s pay has increased by about 13.7 percent in 40 years.
“CEOs are not doing well just because they’re at the high end, they’re doing far better than everyone else at the high end,” Larry Mishel, senior labor economist at the EPI, told The Washington Post.
The report comes as many firms have announced their executives and CEOs will take pay cuts this year in response to the pandemic as many people lose their jobs. But Mishel said these cuts will be a relatively small portion of their overall pay because most of CEO pay comes from stock awards and stock options.
Mishel told the Post that this could mean CEO compensation would increase this year as the market bounces back. But Robin Ferracone, CEO of executive compensation consultancy Farient Advisors, told the Post that it is more likely the compensation will remain flat or drop slightly on average.