CEOs get $800K pay raise, leav­ing work­ers in the dust

The Wichita Eagle - - Front Page - BY STAN CHOE

Did you get a 7% raise last year? Con­grat­u­la­tions, yours was in line with what CEOs at the big­gest com­pa­nies got. But for chief ex­ec­u­tives, that 7% was roughly $800,000.

Pay for CEOs at S&P 500 com­pa­nies rose to a me­dian of $12 mil­lion last year, in­clud­ing salary, stock and other com­pen­sa­tion, ac­cord­ing to data an­a­lyzed by Equilar for The As­so­ci­ated Press. The eight-fig­ure pack­ages con­tinue to rise as com­pa­nies tie more of their CEOs’ pay to their stock prices, which are still near record lev­els, and as prof­its hit an all-time high last year due to lower tax bills and a still-grow­ing econ­omy.

Pay for typ­i­cal work­ers at th­ese com­pa­nies isn’t ris­ing nearly as quickly. The me­dian in­crease was 3% last year, less than half the growth for the top bosses. Me­dian means half were larger, and half were smaller.

The sur­vey showed that it would take 158 years for the typ­i­cal worker at most big com­pa­nies to make what their CEO did in 2018, seven years longer than if both were still at 2017 pay lev­els. And when top ex­ec­u­tives are al­ready mak­ing so much more than their em­ploy­ees, the big­ger per­cent­age raises com­pound the widen­ing fi­nan­cial gap.

Anger about widen­ing in­come in­equal­ity is ris­ing around the world, from Capi­tol Hill to protests in streets. But it’s only slowly seep­ing into the con­fer­ence rooms where boards of di­rec­tors set the pay for CEOs. Boards are of­ten more con­cerned with what a com­peti­tor may pay to poach their CEO than how much more that per

THERE’S A BE­LIEF THAT IF WE UN­DER­PAY OUR CEO, THEY CAN GO WORK IN PRI­VATE EQ­UITY. THEY CAN GO WORK FOR A COM­PETI­TOR. THEY WILL FIND PLACES TO GO.

Eric Hosken, a part­ner at Com­pen­sa­tion Ad­vi­sory Part­ners

son makes ver­sus the rest of the work­force.

“It’s a nat­u­ral thing for a CEO and a board to say, ‘How are oth­ers who are do­ing sim­i­lar work paid?’ And there’s a nat­u­ral sense that if the board be­lieves and sup­ports their CEO, they don’t ex­pect their CEO to be paid less than the oth­ers in the in­dus­try,” said Eric Hosken, a part­ner at Com­pen­sa­tion Ad­vi­sory Part­ners, a con­sult­ing firm that works with boards.

In­vestors — the ul­ti­mate cor­po­rate bosses who have the power to vote di­rec­tors off the board — also con­tinue to vote over­whelm­ingly in fa­vor of ex­ec­u­tive pay pack­ages at the big­gest com­pa­nies, though the mar­gins have been de­creas­ing.

“There’s a be­lief that if we un­der­pay our CEO, they can go work in pri­vate eq­uity. They can go work for a com­peti­tor. They will find places to go,” Hosken said.

The AP’s CEO com­pen­sa­tion study in­cluded pay data for 340 ex­ec­u­tives at S&P 500 com­pa­nies who have served at least two full con­sec­u­tive fis­cal years at their com­pa­nies, which filed proxy state­ments be­tween Jan. 1 and April 30.

Dis­par­ity deep­ens

This is the sec­ond year that the gov­ern­ment has re­quired com­pa­nies to show how pay for top bosses com­pares with the pay for their typ­i­cal worker. The mea­sure is far from per­fect, mostly be­cause com­pa­nies have a lot of flex­i­bil­ity in how to cal­cu­late the num­bers.

Com­par­isons be­tween com­pa­nies can also be mean­ing­less when one has mostly part-time work­ers in de­vel­op­ing coun­tries while the other has of­fice parks full of Ph.D.s in Sil­i­con Val­ley. But now that com­pa­nies have sub­mit­ted two years of data, in­vestors can see how the gap in pay is trend­ing at in­di­vid­ual com­pa­nies.

At more than 40% of the com­pa­nies in this year’s sur­vey, the CEO’s pay rose by at least dou­ble the per­cent­age of the me­dian worker’s pay gain.

Across the econ­omy, pay is climb­ing at a faster rate for work­ers, but the gains are still be­low where they usu­ally are when the econ­omy is this healthy. Av­er­age hourly pay rose 3.4% in Fe­bru­ary from a year ear­lier, the largest an­nual gain in a decade. Com­pa­nies find that they have to pay more to hold on to staff af­ter the unem­ploy­ment rate dropped to a nearly 50-year low.

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