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The Almighty Buck Businesses United States

US Bosses Now Earn 312 Times the Average Worker's Wage, Figures Show (theguardian.com) 718

An anonymous reader quotes a report from The Guardian: The chief executives of America's top 350 companies earned 312 times more than their workers on average last year, according to a new report published Thursday by the Economic Policy Institute. The rise came after the bosses of America's largest companies got an average pay rise of 17.6% in 2017, taking home an average of $18.9m in compensation while their employees' wages stalled, rising just 0.3% over the year. The pay gap has risen dramatically, with some fluctuations, since the 1990s. In 1965 the ratio of CEO to worker pay was 20 to one; that figure had risen to 58 to one by in 1989 and peaked in 2000 when CEOs earned 344 times the wage of their average worker. CEO pay dipped in the early 2000s and during the last recession, but has been rising rapidly since 2009. Chief executives are even leaving the 0.1% in the dust. The bosses of large firms now earn 5.5 times as much as the average earner in the top 0.1%.
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US Bosses Now Earn 312 Times the Average Worker's Wage, Figures Show

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  • by magzteel ( 5013587 ) on Thursday August 16, 2018 @10:37PM (#57141380)

    "Last year, McDonald’s boss Steve Easterbrook earned $21.7m while the McDonald’s workers earned a median wage of just $7,017 – a CEO to worker pay ratio of 3,101 to one."

    $7,017 is less than half the federal minimum wage. Clearly this "study" includes part time workers.

    • by labnet ( 457441 )

      So given McDonald's employs 1 Million staff, that work out to 42c/week per employee.

      I still think $21.7m is outrageous, but when you are controlling a 100 billion dollar business, 1% increase in their $5.5B annual profit is twice the CEO wage.

      The question is, what performance difference does a $1M CEO bring vs a $21.7M one?

      • by whoever57 ( 658626 ) on Friday August 17, 2018 @01:00AM (#57141822) Journal

        The question is, what performance difference does a $1M CEO bring vs a $21.7M one?

        Probably a significant improvement in performance by the $1M CEO (there was a study that showed that lower-paid CEOs tend to perform better).

        The idea that CEOs should be paid according to the improvement in the bottom line that they bring is flawed: there is no equivalent downside if the company does badly under their leadership. Yes, their total pay may drop a little, but imagine if it could go negative!

        • It is a club (Score:4, Informative)

          by aberglas ( 991072 ) on Friday August 17, 2018 @01:23AM (#57141892)

          Who determines the CEO's salary? Not the mum and dad share holder. Not even the institutional ones unless the salary is completely outrageous. It is a board. And who is on that board? A bunch of mates that nobody really knows.

          That is what creates the high salaries. Nobody is really accountable for them. And the CEO is probably on the board of other large companies.

          So, the CEO needs to be basically competent, at least at managing the board. But nobody knows who is or is not good at managing the company. Whether it is doing well because or despite the CEO.

          The exception is probably CEOs that actually built the company. Bill Gates comes to mind. Love or hate him, he was clearly competent.

  • by Seth Morabito ( 2273 ) on Thursday August 16, 2018 @10:45PM (#57141410)

    It's fine. The average boss works 312 times harder than their average employee, so it's all good.

    • by phantomfive ( 622387 ) on Thursday August 16, 2018 @11:31PM (#57141568) Journal
      I don't know if he's worth it, but I want to point out you are measuring the wrong thing there.

      People don't get paid based on how hard they work (otherwise cherry pickers would get paid much, much more than computer programmers). People get paid based on the value they produce.

      If you want to know if it is worth it, you can't measure how hard they work, you have to measure the value they have. Which may be rather low.
      • by quantaman ( 517394 ) on Friday August 17, 2018 @12:46AM (#57141774)

        I think you're also measuring the wrong thing.

        The value you produce factors into it, but an arguably more important factor is your bargaining power. Even if a cherry picker could in fact produce more value than a programmer, a programmer has a much rarer skillset than a cherry picker, so the programmer is able to bargain for a much bigger fraction of that value.

        I think this is where the big gap comes from, if either the cherry picker or the programmer want a raise they need to a) justify the raise to their manager, b) have their manager justify their higher costs, and c) demonstrate why they should get more given the prevailing wage for comparable positions in the area.

        But the CEO talks directly to the board, comparables are much harder to come by, and since the CEO is the major lever the board has they're bound to overvalue it. Plus boards are typically made of other executives, people who will be sympathetic to the idea of big CEO compensation.

        Is the CEO making 312x as much contributing 113 employee units of value over the CEO making 200x as much? I don't think the calculation is that precise.

  • The McDonald's and Walmart CEO's make about $10 per employee per year.

    The US Government taxes those employees far more.

    CEOs make more money because they have far more employees working for them. Small business owners don't make nearly as much as large companies with thousands of employees.

    • by Leuf ( 918654 )
      Your $10 figure is right for Walmart but it's closer to $100 for McDonalds. In any case, the tax reference is bizarre. CEO pay is not a tax on employees. Yet considering that the average McDonalds employee makes $7000 a year, they don't pay any federal income tax. They probably receive money through the EIC along with any other programs they are enrolled in.
    • The McDonald's and Walmart CEO's make about $10 per employee per year.

      The US Government taxes those employees far more.

      You're saying this as if it's justified and fair. Why should a major CEO's compensation be proportionate to the number of employees they have? Shouldn't it be valued at the value they bring themselves? That's how everyone else works.

  • real problem (Score:5, Insightful)

    by Tom ( 822 ) on Thursday August 16, 2018 @11:08PM (#57141494) Homepage Journal

    The real issues is not in the number.

    It's in the fact that these guys basically decide their own salaries. Mr. Boss is the CEO of company A, and sits on the board of company B and C. Mr. Big, meanwhile, is CEO of company B, but sits on the board of A and C, and Mr. Greedy is CEO of C and on the board of A and B.

    Guess what they will decide when it comes to yearly reviews and salary adjustments.

    The system is broken because a relatively small in group decides amongst themselves, instead of the independent outside review that the system is intended to have. It doesn't even need to have all companies working like that - company D which has a clean board and CEO, will not be able to resist the upwards pull of the others, because the CEO of D one day will get an offer from A, or just look at it, and see that the CEO there gets 200% more, and he will ask his board why he doesn't and what they will do to stop him from going there.

    This kind of built-in dilemma is exactly where government oversight and regulation comes into play, when the system is broken and needs outside interference to right itself. Because no publicly traded company will start with the change, because doing so just isn't a rational decision.

  • by Mittengrabber ( 4558803 ) on Friday August 17, 2018 @01:42AM (#57141934)
    I'd hazard that if one individual is worth 312x any other individual in the company it's pointing out a fundamental problem with the structure of your business.
  • by Sqreater ( 895148 ) on Friday August 17, 2018 @07:38AM (#57142990)
    The idea that the top executive is an employee of the corporation has long ago faded. Now the top executive is more like a mafia don getting "a cut of the take," like the corporation is a criminal organization.
  • by walterbyrd ( 182728 ) on Friday August 17, 2018 @07:42AM (#57143024)

    Usually when they talk about executive "pay" they mean total compensation. Much of that compensation comes from stock options.

    Since the market is way up, so is total executive earnings.

    Maybe they should give some stock options to the rank and file?

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