American CEOs earned less in 2015 – but the dip is only temporary

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The top 350 US CEOs earned 5.1% less last year than in 2014, bringing home an average of just $15.5m, according to a report from the Economic Policy Institute.

The dip in earnings had little to do with the increased attention to income inequality or discrepancy in pay between top executives and low-wage workers. Instead it’s all down to last year’s turbulent stock market.

The report, released on Tuesday by the left-leaning firm, comes at a time when both the S&P 500 and Dow have reached new record highs.

After analyzing pay packages – including salaries, bonuses, incentive payouts and stock options – of chief executives at the top 350 firms, EPI found that about 83% of decline in CEO pay was due to the drop in value of realized stock options in that period.

“The stock price of any given company is largely a reflection of the stock market overall, not its CEO’s performance,” said Lawrence Mishel, EPI president and co-author of the report. “We see that in the way that average CEO pay tracked the stock market in 2015. CEO compensation will likely resume its upward trajectory when the stock market moves up again.”

On Monday, the S&P 500 closed at a record high of 2,137.16, topping its previous record of 2,132.8 set in May 2015. On Tuesday, it opened at a new record high of 2,146.29. The Dow also opened at a new record high, peaking at 18,359.

A healthy stock market could signal higher CEO pay in 2016.

In 2015, top CEOs took home 276 times more earnings than typical workers. In 2014, however, their compensation was 302 times that of average workers. Despite the very modest dip in pay,CEOs are still earning a lot more than they have been in the past. According to EPI, from 1978 to 2015, inflation-adjusted compensation of top CEOs increased by 940.9%. During that same time, in comparison, a typical worker’s pay went up by a paltry 10.3%.

“CEO pay has grown far faster than the pay of typical workers, college graduates or even the top 0.1%,” said Jessica Schieder, an EPI research assistant and co-author of the report. “Skyrocketing CEO pay isn’t about the market for talent – it’s about what executives can get away with.”

In the lead-up to the 2016 presidential election, income inequality has become a much debated issue. Eight years after the recession began, the top 1% of earners have recouped the majority of their lost incomes, and CEO pay remains up 46.5% since 2009. Average workers, however, have yet to truly feel the effects of the US recovery.

“Inequality is still too high,” Barack Obama said in June while speaking about the US economy. “The gap between rich and poor is bigger now than it’s been just about any time since the 1920s.”

Over the past year, the US Department of Labor has often referred to low wages as the unfinished business of US recovery.

“I see people who were really in the ditch and they have climbed out of that ditch. And then I see people who were in the ditch and have not quite climbed out or have barely climbed out,” the US labor secretary, Tom Perez, told the Guardian on Friday after the most recent jobs report was released.

In June, the US economy exceeded expectation when it added 287,000 jobs. In that same month hourly earnings went up by 2 cents to $25.61 an hour.

“That’s what motivates me. We are seeing wage growth, but at the same time we are not seeing enough wage growth,” said Perez. “Our wage growth over the last year is about 2.6%, which is tied for the best in the recovery but again I speak to too many people who haven’t had a meaningful raise in years.”

Powered by article was written by Jana Kasperkevic in New York, for on Tuesday 12th July 2016 18.19 Europe/ © Guardian News and Media Limited 2010


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