It pays to be the top dog.
Pay of chief executive officers, or CEOs, rose by just over 11% from 2020 to 2021, according to a new report by the left-leaning Economic Policy Institute.
Compared to the typical worker’s pay, CEOs were paid 399 times as much in 2021, which is the highest ratio on record, EPI said. In 1965, CEOs only made 20 times of what the average worker made.
On average, CEOs were paid $27.8. million in 2021, the institute said.
And CEO pay has risen by 1,460% since 1978. CEO compensation rose 36% faster than the stock market during this period, the EPI noted, and “far eclipsed the slow 18.1% growth in a typical worker’s annual compensation.”
“Exorbitant CEO pay is a contributor to rising inequality that we could restrain without doing any damage to the wider economy,” Josh Bivens, director of research at EPI and one of the authors of the report, said in a statement.
“We need to enact policy solutions that would both reduce incentives for CEOs to extract economic concessions and limit their ability to do so,” he added.
“Exorbitant CEO pay is a contributor to rising inequality that we could restrain without doing any damage to the wider economy,” the authors of Economic Policy Institute report said.
Economic Policy Institute
CEO pay is changing
The EPI estimated the average CEO compensation of the 350 largest publicly owned U.S. companies. They used data from the S&P Compustat ExecuComp database for the years 1992 to 2021, and survey data published by The Wall Street Journal for selected years back to 1965.
They included salary, bonuses, and long-term incentive payouts, including stock awards, and stock options.
The EPI also noted a shift in how CEOs were being paid: CEO compensation in this round-up had shifted away from the use of stock options and towards the use of stock awards.
CEO of Tesla Motors Elon Musk was excluded from EPI’s analysis since his 2021 earnings would skew CEO pay to show an inflated number. In 2021, Musk exercised $23.5 billion worth of stock options that would have expired in 2022, the EPI said.
(Photo by SUZANNE CORDEIRO/AFP via Getty Images)
Excluding Elon Musk
The EPI flagged an “extreme outlier” in 2021 that they excluded from their analysis for how much their pay exceeded even the typical CEOs: Elon Musk, the founder of electric-car maker Tesla TSLA, +5.19%.
The Tesla Motors chief in 2021 exercised $23.5 billion worth of stock options that would have expired in 2022, the EPI said. This made his pay nearly 1,000 times the average of other CEOs of large companies.
Including his pay would’ve led to an increase in CEO pay of over 300%, they added.
Write to: aarthi@marketwatch.com