News Column

Top CEO, Average Joe Pay Gap Continues to Increase

April 16, 2013
CEO salary

CEOs of the largest U.S. companies were paid an average of $12.3 million last year -- 354 times more than the average U.S. worker who made $34,645, according to a study released Monday by the AFL-CIO.

That works out to a weekly paycheck of $236,538 for the average top executive compared with $666 for the average worker. Put another way, it took the average CEO roughly six hours to make what the average worker made working all year.

That was by far the widest pay gap in the world, the Washington, D.C.-based labor group said.

"American chief executives continued to do very well for themselves last year, while workers struggle to make ends meet," AFL-CIO president Richard Trumka said.

Disparity between CEO and worker pay has shot up dramatically over the years. Thirty years ago, U.S. chief executive officers made 42 times that of rank-and-file workers, the AFL-CIO said.

The group's last report two years ago showed CEO paychecks were 342 times larger than that of workers, averaging $11.4 million annually vs. $33,190.

The AFL-CIO hasn't defined what it believes should be the proper CEO/worker pay ratio.

The late management consultant Peter Drucker "thought that a ratio of 20 or 25 was appropriate," said Patrick O'Meara, corporate finance specialist at the AFL-CIO's Office of Investment.

The $12.3 million average CEO pay figure was based on 327 companies in the S&P 500 Index that had disclosed 2012 pay data as of April 1, 2013. Figures from the U.S. Bureau of Labor Statistics were used to calculate worker pay.

The group posted the survey results on its website, www.paywatch.org, which is a searchable database that lets people look up CEO pay by industry and state.

The site also allows comparisons between a worker's own pay and that of top executives by clicking the "How You Compare" tab and entering an annual salary. (Do not use dollar signs or commas.)

In all, the online database covers about 3,000 companies using proxy statements for 2011 and 2012.

Chief executives from two Pittsburgh-area companies made the site's list of the 100 highest paid CEOs: Cecil-based Mylan Inc.'s former CEO Robert Coury, landing at No. 66 with 2011 compensation of $21.3 million, and Downtown-based PPG Industries' CEO Charles Bunch, finishing at No. 100 with $17.9 million in 2012.

New features on the site include a survey that examines votes cast by the largest mutual fund families to constrain CEO pay, and an interactive map that provides CEO pay ratios in a number of other industrialized countries. For example, chief executive officers in the United Kingdom earn 84 times the average worker, according to the site. In Japan, it's 67 times.

The AFL-CIO believes a provision in the Dodd-Frank package of Wall Street reforms passed in 2010 that requires companies to compare their CEO pay to the median of their employees could help curb executive pay by shedding more light on the disparities. But the Securities and Exchange Commission has yet to issue rules needed to implement the provision.

Information on pay ratios is essential for investors to determine if a company's executive pay is excessive, the AFL-CIO said.

Studies have shown that large pay disparities between CEOs and their employees "can hurt employee morale, reduce workplace productivity and lead to increased employee turnover," the group said.



Source: (c)2013 the Pittsburgh Post-Gazette. Distributed by MCT Information Services.


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