CEO-to-Worker Pay Ratio Widened Last Year

By:
Chris Gaetano
Published Date:
Jun 11, 2021
CEO

While 2020 was a time of major economic insecurity for tens of millions throughout the country, the nation's wealthiest CEOs did not just well but great, as pay for chief executives increased by 14.1 percent, the New York Times reported. In contrast, in the year before the pandemic, when the economy wasn't a disaster, workers gained just 1.9 percent in salaries. In 2020, according to the most recent data, CEOs made 274 times the amount of the average worker they employed, compared to the still-huge-but-a-little-less-so ratio of 245 times the average worker's pay in 2019. The Times quoted Sarah Anderson, global economy director at the Institute for Policy Studies, who said, “While Americans were cheering on the workers who were keeping our economy going, corporate boards were busy coming up with ways to justify pumping up CEO pay,”

Much of this increase stemmed from the fact that CEO compensation is tied with stock prices, which, despite the aforementioned economic chaos, on the whole, ended higher at the end of last year. Beyond just their stock value increasing, companies gave CEOs additional rewards for meeting price targets. However, the Times also noted that some companies, such as Opendoor, just granted their CEO extra stock options that will vest in four years.

The importance of stock performance to CEO compensation is germane to the recent ProPublica story that arose from the IRS leaks, showing that ultra-wealthy chief executives avoid taxes by using their securities assets as collateral for loans, which technically do not count as income.

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