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CEOs See Pay Soar While Workers Gain Little

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Workers’ salaries may be stuck in limbo, but that isn’t stopping top company executives from being rewarded financially.

A new report from the Economic Policy Institute (EPI) shows that compensation for chief executive officers at the top 350 publicly traded companies in the U.S. soared last year by 17.6 percent to almost $19 million a year. That’s 312 times what the average worker at those companies made in 2017. If you’re wondering, the compensation of rank-and-file worker rose only 0.3 percent at these firms.

“With wages for working people barely budging, it’s remarkable to see top CEO pay surging again,” said Larry Mishel, an EPI distinguished fellow.

During the past five decades, top CEO has soared at a rate far surpassing corporate profits, the pay for the top 0.1 percent of wage earners or wages for college graduates, EPI notes. Instead, the pay scale for top corporate executives seems to be tied to the performance of Wall Street. Most of the additional compensation was in the form of stock awards and cashed-in stock options, not additional salary or bonuses.

EPI authorities said the increase in CEO compensation is being driven by the fact that they have the power to set their own pay, not because they are doing better at their job. Given that, if these top executives were paid less or taxed more, it would not adversely affect output or employment.

“Skyrocketing CEO pay is not a reflection of the market for executive talent,” said Jessica Schieder, an EPI economic analyst. “We know this because CEO compensation has grown far faster than even the very highest earners in the country. This means that CEO pay can be brought down with little if any impact on the output of the economy or firm performance.”

Lawmakers could help solve the issue if they took steps to reinstate higher marginal income tax rates for highest earners; set corporate tax rates higher for businesses that have higher CEO-to-worker compensation ratios; create a compensation cap that would tax anything above the limit; and allow firm shareholders to vote on compensation for top executives.

The Teamsters have been active in the fight for fairer CEO pay, most recently leading a campaign against the compensation plan for McKesson Corp. CEO John Hammergren due to the company’s involvement in the opioid crisis. The company ultimately decided to cut his pay by 10 percent.

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