Skyrocketing CEO Pay Hurts Everyone, and Here’s Why

Apple CEO Tim Cook speaks at an Apple special event - Source: Justin Sullivan/Getty Images

Apple CEO Tim Cook speaks at an Apple special event – Source: Justin Sullivan/Getty Images

Executive pay has spiraled into the stratosphere in America. One result has been the propagation of a large income gap, creating a chasm between the rich and poor like never before. While examples of obscene wealth disparity are seen around the world in places like India, Saudi Arabia, and Russia, Americans always took pride in our high degree of social mobility, and that we took care of each other. This is becoming less and less the case.

Last year, The Economic Policy Institute released data which reflects the high degree of wealth disparity. It found that since 1978, CEO pay has increased by 937%, compared to a paltry 10.2% for the average employee. In their study, the EPI also found that the average CEO’s salary in 2013 came in at $15.2 million, an increase of 2.8% from 2012 and up 21.7% since 2010. These numbers may indicate that some companies took advantage of the financial crisis to shift more profit towards the paychecks of executives, rather than stave off layoffs and other cost-saving measures.

Al-Jazeera America points out that while the average annual salary figure of $15.2 million is very high, it’s not quite as high as it was in 2000 prior to the 2001 stock market crash, when salaries averaged $18.5 million. While high CEO salaries can be used as an indicator of a strong economy and strong markets, this may not be the case with America’s current situation where the median household income averages around 0.33% of a CEO’s salary today, at roughly $51,000.

“The increase in CEO pay over the past few years reflects improving market conditions driven by macroeconomic developments and a general rise in profitability. For most firms, corporate profits continue to improve, and corporate stock prices move accordingly. It seems evident that individual CEOs are not responsible for this broad improvement in profits in the past few years, but they clearly are benefiting from it,” the report says.

“This analysis makes clear that the economy is recovering for some Americans, but not for most.”