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Weekly Perspective
April 22, 2024
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Chief Executive Officer (CEO) Pay Increased
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It’s not an economic indicator, but the compensation companies pay CEOs affects employee, customer, and public perceptions.
“Pay is critical for attracting, retaining, and motivating a CEO, and affects the wider company beyond the CEO – high pay may demotivate employees or damage a company's customer reputation. Even more broadly, CEO pay across the economy influences the public's perception of capitalism,” explained researchers Alex Edmans, Tom Gosling, and Dirk Jenter in the Journal of Financial Economics.
Last year, median annual pay for America’s CEOs hit a new record: $23.7 million, an 11.4 percent increase from the prior year, reported Andy Serwer and Angela Palumbo of Barron’s. “Median pay for CEOs in this group is now a record 300 times that of their median employee’s, compared with a ratio of 255 in 2018,” reported Serwer and Palumbo.
Serwer and Palumbo cited data from an analysis of the largest pay packages for CEOs at U.S. public companies with revenues of $1 billion or more. (Median is the number in the middle, not the average.) CEO pay at the companies measured ranged from about $162 million to about $19 million in 2023.
So, how does the increase in CEO pay stack up? It was:
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Higher than inflation, which was up 3.4 percent in 2023.
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Higher than wage and salary increases for union workers, which averaged 5.4 percent.
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Higher than wage and salary gains for non-union workers, which averaged 4.2 percent.
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Higher than benefits cost increases, which averaged 3.6 percent.
Median annual pay for U.S. workers was about $58,000 in 2023, according to Eric Van Nostrand, Laura Feiveson, and Tara Sinclair of the U.S. Treasury Department.
“Before anyone feels compelled to storm the barricades, it’s worth noting that the 11.4% gain in CEO pay is less than the 13.8% total return to shareholders produced by these companies last year. In fact, CEO pay for top companies climbed 8.77% on average annually over the past six years, while the total annual average return for these companies was 12.02%.” reported Serwer and Palumbo.
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Sources:
https://www.reuters.com/markets/rates-bonds/global-markets-interest-rates-analysis-pix-2024-04-17/
https://www.cnbc.com/2024/04/16/watch-fed-chair-powell-speak-live-during-a-policy-forum-in-washington.html [17:02 - 19:18]
https://www.barrons.com/articles/stocks-fall-what-to-do-f55f5c3d (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/04-22-24_Barrons_Why%20the%20Stock%20Market%20Will%20Continue%20to%20Fall%20and%20What%20to%20do%20Now_3.pdf)
https://www.bloomberg.com/news/articles/2024-04-18/stock-market-today-dow-s-p-live-updates (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/04-22-24_Bloomberg_Mag%207%20Gets%20Crushed%20Before%20Next%20Weeks%20Results_4.pdf)
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/04-22-24_Bloomberg_Mag%207%20Gets%20Crushed%20Before%20Next%20Weeks%20Results_4.pdfO
https://www.sciencedirect.com/science/article/pii/S0304405X23001587#abs0001
https://www.barrons.com/articles/ceo-worker-pay-broadcom-disney-microsoft-stock-performance-6db7d02c?mod=hp_LEAD_4 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/04-22-24_Barrons_CEO%20Pay%20Rose%20to%20Another%20Record%20Last%20Year_8.pdf)
https://www.equilar.com/reports/102-equilar-new-york-times-top-100-highest-paid-ceos-2023.html
https://home.treasury.gov/news/featured-stories/the-purchasing-power-of-american-households
https://www.usinflationcalculator.com/inflation/current-inflation-rates/
https://www.bls.gov/news.release/eci.nr0.htm
https://www.brainyquote.com/quotes/bill_gates_626044?src=t_measurement