Paper 4

Haitao Wang

Student ID: 278706302

BCOR_480_02: Business Policy

CEO Compensation

Nowadays, inequality has been a big issue in the society of the United States. The riches are richer while the poor are poorer. One of the significant evidence is that: CEO pay increased too faster than worker pay over last 30 years.

According to the study of Economic Policy Institude, the 1980s, 1990s, and 2000s were prosperous times for top U.S. executives, especially relative to other wage earners and even relative to other very high wage earners. Executives constitute a larger group of workers than is commonly recognized, and the extraordinary pay increases received by chief executive officers of large firms had spillover effects in pulling up the pay of other executives and managers. Consequently, the growth of CEO and executive compensation overall was a major factor driving the doubling of the income shares of the top 1.0 percent and top 0.1 percent of U.S. households from 1979 to 2007. Income growth since 2007 has also been very unbalanced as profits have reached record highs and, correspondingly, the stock market has boomed while the wages of most workers have declined over the recovery (Mishel,2014).

From 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period. The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013, far higher than it was in the 1960s, 1970s, 1980s, or 1990s (Mishel,2014).

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...