CEOs get paid 273 times more than you do

A new report says top execs' compensation has rocketed by 875% from 1978, while the average American's paycheck grew just 5.4%.

By Aimee Picchi Jun 27, 2013 11:39AM

Here's a lesson for today's kids. If you want to get ahead in life, it helps to be a chief executive of a major U.S. corporation. 

The CEOs of the country's 350 top companies earned average compensation of $14.1 million in 2012, including the value of stock options exercised that year, the Economic Policy Institute reports in a new study. 

For average workers, that means their bosses are hauling in pay that's roughly 273 times their own, an income disparity that's far higher than the 1960s through the 1990s, the authors note. Even as recently as 1995, the ratio was only 123-to-1, while in 1965, it was a relatively meager 20-to-1. 

How did CEO pay get so out of whack with ordinary workers? 

The answer is that compensation for company's top dogs jumped by 875% between 1978 to 2012. By comparison, the average worker saw a "painfully slow" 5.4% growth in income during the same time period, the report noted (the EPI's figures are adjusted for inflation).

CEO (© Comstock/Jupiterimages)As the CNBC video above recounts, one recent stark example of sky-high pay is that of McKesson's (MCK) former CEO John Hammergren, who'll receive a record lump-sum pension payment of $159 million. His age? 54. 

On top of that, Hammergren wasn't exactly poorly compensated during his 14 years as leader of the pharmaceuticals and health care products supplier, earning almost $400 million during that time, according to CNBC. 

"In this case, one should understand better why a competent CEO in a pretty traditional industry should be rewarded so highly," John Sculley, a former CEO of Apple (AAPL), told the cable-news network. "What's a little bit strange is that he's 54 years old, and he would have had a discount on his pension because he was retiring before age 62. The board waived that. "

As high as it is now, CEO pay isn't as egregious as it was at its peak in 2000, when the ratio to average worker pay was 383-to-1. 

Yet while the American dream appears to be alive and well for top executives, it's not so rosy near the bottom. Harvard professor Niall Ferguson, writing in The Daily Beast, questions whether rising inequality has killed the dream for much of America's workers.

The Federal Reserve's monetary policy since 2008, he writes, "has been to push up the price of assets. Guess what? The rich own most of these."

As the Economic Policy Institute report noted: "Those at the top of the income distribution, including many CEOs, are seeing a strong recovery while the average worker is still experiencing the detrimental effects of a stagnant labor market."

The bottom line: if you're a CEO, the recovery is going just fine. For the rest of American workers, not so much.

Follow Aimee Picchi on Twitter at @aimeepicchi. 

More on moneyNOW

Jul 3, 2013 3:51AM
We should force our public owned corporations to pay our minimum wages wherever they go. This would show a little respect for workers and slow outsourcing, Instead we give the pigs special treaties and tax breaks to help them destroy our middle class.
When the CEO of Disney made 600 million in salary and God knows what in bonuses, he had children working in Haiti for 12 cents and hour. This is the insane greed that is destroying America. Our corrupt to the bone corporate and financial systems are a disgrace to the human race and they own both prostitute political parties.
We will force real change or be pushed into chaos and depression.

Jun 27, 2013 7:27PM
 LOL And people on this board think union members are overpaid ? LMFAO What a bunch of idiots you all truly are .
Jun 27, 2013 6:56PM
The pay of CEOs and other top execs is set by other execs in similar brackets who make up their Board of Directors.  It's no surprise to see them scratching each other's backs - "you give me a raise and I'll give Joe one and he'll give Sarah one, and she'll do the same for you".  What we need is caps to keep the CEO-to-Worker pay-ratio within sane bounds, but that is unlikely to be voted in because the biggest blocks of stock are managed by other obscenely paid execs in huge investment and pension funds. This elite cadre of and yachting and golfing buddies contrive to create this 273 - 1 nonsense because it works out just fine for them.   
Jun 27, 2013 12:07PM

This is what people should be pissed about.I hear righties that want to eliminate the

minimum wage and these snakes can make millions for screwing up.Nikes` cost $200

bucks while the actual cost of making them is $10.The $190 goes to jocks commercials

and top management getting millions.

Jun 28, 2013 11:36AM
Of course the explosion is since 1978.  The pay rates are all out of whack due to the failed economic and tax policies of the 1980's and early 1990's, that were specifically designed to increase the wealth at the top.
Jul 3, 2013 8:16AM
Just goes to show you the rich get richer and the workers that get them richer get f.
Jul 3, 2013 9:08AM
Many of us already knew this, and I'm all for executives getting compensated very well for doing what they do for the company, but this ratio represents a MAJOR problem in this country that doesn't exist in other developed countries. And it's not just the CEO's, but most executives, and most major companies have several of these people making 100 - 400 times what employees are making and this is why so many families are struggling to make ends meet. The American system has become too corrupt and out of balance, and this is why we are still outsourcing so much despite of low salaries of employees below upper management. Plus, so many people have staggering college debt but still have a job that pays not much more than it would have 10 - 15 years ago when the cost of living was much less. This needs to change, and soon.
Jun 27, 2013 4:10PM
so at the 20-to-1 rate of 1965 with the average employee making, let's say $50k/year, the CEO would be making $1 million a year. Is that not enough? 
Jul 3, 2013 11:29AM

So that's basically 273 jobs that could have been created or funding for new produce creation. Yeah, I cry for the wealthy when they have to pay taxes of  an effective 13% (what they really pay, not 34%). Us common workers have only seen a 5% pay increase! Wow management is screwing us over. The common worker does the grunt work, but the paper pusher gets the real pay. This is what is wrong with capitalism. The rich abuse the systems (tax, stock market, and political) to keep  on getting richer.

Jul 3, 2013 10:52AM
what party do  these CEOs support. The party of the rich who else. Wake up workers these GOP guys are trying to make this county like China. 70% of Walmart workers are on some sort of Government benefits, while the top 4 wealthiest people in the world are Waltons .
Jul 3, 2013 12:03PM

This bunch of Thieves....(including the all sports players)...CEO's...even that they study hard in's alright to get pay well, but not that real high...and..crooked way...because of them.....everything is so expensive to the average people....they're greedy and irresponsible! fair, whatsoever!


Jul 3, 2013 4:41AM
Let me see...a more useful degree....I might have done that....except I did not go to college because my family were so poor, and the programs that help were not in place. I am still unemployed, all during the last election all I heard from the Republicans was how they were all about jobs. So where are the jobs? Liars. Now they are WASTING our time going State to State attempting to change Abortion Laws thus removing another Right of Choice. In States that have A "Death Penalty" Pro Lifer's are hippocrites. "They care all about life", they say, yet in the next breath they execute another inmate. It is the need for Control, plain and simple. Here in the forsaken Texas, Tricky Rick Perry has refused to expand Medicaid, at NO cost to the State, keeping the poor uninsured under Obama care. What is really sad is the people at the top think that they deserve all their salary and more. They also can not be bothered with the less fortunate. They are more concerned with what is approiate apparrall for playing Croquet, Golf, or Tennis. Americans need to "Walk Like An Egyptian", and install a real Democracy. One where the majority votes wins. Not Electoral College, not 2/3 majority, and not government bought and paid for by the Corporations, Americans For Prosparity, or any other "Front" group. But, alas, Americans will never "walk like an Egyptian" because they are too busy trying to screw another American for a buck unable to organize.
Jul 3, 2013 9:09AM

And what do you think who earns that money for, the regular people who are strugling to make their ends meet every week...while at the same time all our freedoms are being taken away...slavery at its best..the whole planet is becoming the slave labor camp for 99% of population..


Revolution, the only solution! 


P.S. I typed 'revolution' and 'freedom' in the same oh my is NSA flagging this post right now...:) 

Jul 3, 2013 2:04PM
CEO pay. The gift that keeps on giving more taxes to the American taxpayers' burden. Taxes paid to subsidize companies to subsidize CEOs to increase profits of companies not taxed just so the American worker can cover companies shortfall in not paying taxes and then have the American taxpayer pay more for the goods and services produced by these companies. And of course, union and government workers are all overpaid. As compared to whom? The slave labor force they are about to become? The idiocy of the GOP in disparaging unions and civil servants only proves their disdain for working class folk.
Jul 3, 2013 3:31PM

Tie these fat pig's pay to the company's real value not just the stock price.

  In determining their worth, figure in how much taxable income their employee base generates and include in that the taxes on profits the company feeds back into the local economy.

  Keep stock options off the table when negotiating salary. 

Include in the big shots compensation a factor that is tied to the number of employees earning above $50,000 per year wages.

Tax the living crap of these overpaid, do nothing, 1%ers at both local and state levels.  Do not let the feds be responsible for getting the taxes out of the greedy air bags.  They are the ones who put the greedy Federal politicians in their job in the first place.

Jul 3, 2013 4:33PM
No single man drives a major corporation to success and they are not worth the kind of money they cost. And this is why I have to buy cheap garbage from China and use a credit card to pay for it because paying for it all at once will overstretch my budget for the month, what a sham. A successful company should also include all the little guys who also helped contribute to it. A successful employee at work and at home will make a much larger contribution to their job, the economy and their families instead of always struggling to pay the bills and worry if you're getting outsourced to some Indian or Chinese sweat shop for pennies on the dollar. We all work but will work harder with an incentive to succeed. Almost seems to be getting cheaper to stay home and collect some form of gov't welfare rather than to strive to succeed. And a lot less headache than to listen to some slob tell you how dispensable you are and can be readily replaced.
Jul 3, 2013 7:29PM
Greed!  Greed! The law should state that no CEO/President can make more than 20 times more money than his lowest paid worker!  Benefits too!
Jun 27, 2013 12:27PM
My favorite sports star makes 100 times more.  Should I be upset?
Jul 3, 2013 3:14PM
It is the way of all flesh my caring and thoughtful citizens. No matter what we do or how educated we become, these corporate moneygrabbers are in it for their own gans. It's the basic tenet of capitalism. Get the most you can get regardless of anyone else. The olast 5 years of my teaching career (the ones that your retirement is based on..) I didn;t have one peeny raise, while these "Patriotic American CEOs" were reaping bonuses from the fiscal collapse. These businesses, just like War, make so much money off of other's distress and poverty. Nothing will change unless there is a collapse in healthcare, collapse in energy, or a collapse in our worship of technology. It's just around the corner, so money will be meaningless. Courage and fortitude, the fabric of most of the world's middle class, will persevere.
Jul 3, 2013 4:47PM
But remember, you are solely in control of your destiny, so capitalize on it people.
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