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During
the last 25 years, the CEOs of America’s (500) largest corporations
have systematically increased their power and prestige, along with
their personal fortunes, while growing the assets they were
entrusted with in many ways, not always as beneficial to their
shareholders and to the US economy as a whole.
In
the same period, average employee and workers’ wages stagnated, as
they were essentially cut off the benefits of a huge increase in
productivity, which itself was not only induced by technological
progress but also by massive layoffs. While the shareholders of US
corporations did get a large slice of the productivity gains in the
form of higher returns, the biggest winners were the top executives.
According
to the Economic Policy Institute , the ratio of average CEO
compensation to the minimum wage soared from 78 in 1978 to 821 in
2005. A similar study by the Institute for Policy Studies shows,
that the ratio of average CEO compensation to average worker’s wages
soared from 42 in 1975 to 364 in 2006, after peaking at 525 in the
year 2000.
In
absolute terms, Forbes’ analysis of CEO compensation between 1988
and 2008 (fiscal years) shows, that the average CEO compensation of
an S&P indexed company rose from $2,3 million to $11,4 million after
peaking at $15,8 million in 2006. This is a compounded average
annual increase of 8,3%. During the same 20 years, the S&P500 Index
rose from 294,87 to 797,85 (Apr1-March31), ie an average compounded
annual increase of only 5,1%.
The
analysis also shows that while stock gains, realized upon the
vesting of stock options, still represent 48% of total compensation
(vs 28% in 1988 and 60% in 1998), the share of so called “other
compensation”, which includes perks and for tax purposes deferred
compensation, gradually increased from 8,9% in 1988 to 15,3% in 1998
and to 27,2%. Regular salary and (cash) bonuses, elements also known
to rank of file employees, represented less than 25% of an average
CEO’s compensation in 2008, somewhat over $2,8 million.
Then
again and despite these truly large income figures, we hardly expect
the average CEOs of the largest US corporations to be on our list,
as the latter only considers the richest ones, ie those who had
accumulated a net worth of $100 million in spring 2008. We therefore
analyzed Forbes annual listing of the S&P500 CEO’s compensations for
the twelve years between 1997 and 2008.
In
our methodology, we also make a difference between real executives,
ie those CEOs who rose through the ranks of normal employees or were
hired for the top jobs, and those who owe their position, and the
bulk of their wealth to their own or their forebears’ role in
founding the company. Thus, company founders, entrepreneurs or large
shareholders through inheritance, are not included in our list,
although they might be included in the text section and the
corresponding tables.
This
eliminates active entrepreneurs like Michael Dell, Masco’s Richard
Manoogian, who inherited his wealth and position, as well as a
number of not so highly paid but wealthy CEOs, including Warren
Buffett (Berkshire Hathaway), Jeffrey Bezos (Amazon) and Thomas
Golisano (Paychex). Many more fall into this category and will be
sought in vain on our list.
Hail to the CEOs
> Index
and Introduction
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