A Classification of American Wealth
History and genealogy of the wealthy families of America - Sponsors

 Part 1 : Colonial and Mercantile America  Part 2 : America in the Gilded Age
 Part 2 : America in the Twentieth Century  Encyclopedia of American Wealth

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  Part III-Chapter 18 : Hail to the CEOs  >   Index and Introduction  :    « Previous  1 2 - 3 - 4 - 5  Next »

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  :  « Previous  1 2 - 3 - 4 - 5  Next »

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