August 18, 2019; Star Tribune (Minneapolis, MN)
Since 1978, CEO pay has grown by 940.3 percent at the country’s top 350 companies, even as the average worker gained only 11.9 percent in wages over the same four decades. So says the Economic Policy Institute in a study. Furthermore, such raises are not only unjustified but harmful at many levels for the rest of society.
Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with. CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills. This escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0% and top 0.1% incomes, leaving less of the fruits of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. The economy would suffer no harm if CEOs were paid less (or taxed more).
“In our view, the CEO compensation and escalation is not reflective of some big gaining of skills or improved contribution to their firm’s performance or the economy,” says co-author Lawrence Mishel, a distinguished fellow with the Institute. “That means we could tax away half of what they take in, and I think the economy would be the same size.”
CEO pay does not rise alone; according to the report, on a slightly more modest trajectory are other top workers. The top 0.1 percent of earners grew 339.2 percent from 1978 to 2017.
Among the proposed policies the EPI recommends to ameliorate the problem are reinstating higher marginal income tax rates and higher corporate tax rates for companies with higher CEO-to-worker compensation ratios. In the end, the study concludes, “The economy would suffer no harm if CEOs were paid less [or taxed more].”—Ruth McCambridge