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Personal Finance
CEO salary gap widens
August 30, 2000: 4:37 p.m. ET

Executive pay surged 535% in 1990s, while average worker pay rose 32%
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NEW YORK (CNNfn) - If you don't resent the fat cats in the corner office yet, keep reading.

A new study conducted by the Institute for Policy Studies and United for a Fair Economy reveals CEO compensation soared into the stratosphere in the 1990s, rising 535 percent, not adjusting for inflation. The rate of growth far outpaces gains in the stock market for the decade, when the S&P 500 rose 297 percent.

It also dwarfed the increase in worker pay, which climbed 32 percent for the same period, barely outpacing inflation at 27.5 percent.

"Over the years, as CEO pay packages in the tens if not hundreds of millions of dollars have become increasingly routine, the shock value has begun to ebb," the report, titled "Executive Excess 2000" states. "Unfortunately, this year's report once again confirms the predictable - that inequality between executive and worker pay continued to grow in 1999." 

The group's seventh annual report found that if pay levels for workers increased at the same rate as CEOs', the annual pay would average $114,035 a year, instead of $23,753. Likewise, if the minimum wage had risen as fast, it would now stand at $24.13 an hour instead of the current $5.15.   

"The purpose of our annual studies has been to raise awareness of the trend towards rising inequality that we believe is inconsistent with a health democracy and basic principals of economic fairness," the Institute writes.                               

Entitled "Executive Excess 2000," the report focused in particular on the paychecks of Internet CEO's.

It found the top executives of 50 top Internet companies surveyed by Fortune magazine held on average $234.9 million in unrealized options at the end of their fiscal years, compared to $32.5 million for 355 CEOs representing a graphiccross-section of leading U.S. firms.

The total combined value of the Fortune e-50s' unrealized options was $11.7 billion - about five times the worth of the bottom one-third of U.S. households. Sixty-four nations have Gross Domestic Products of less than that.

"Even the most jaded CEO pay watchers were amazed by the explosion of earnings among the new class of leaders in the Internet economy," the report notes.

Often times, Internet firms in particular justify surging salaries for their top execs by saying it's a necessary evil; that their leadership helps drive the company which provides millions of the nation's highest-paying jobs.

But the IPS challenges this theory as well.

"Indeed, there is a big wage gap between average U.S. workers and the information technology workers who are the backbone of the Internet industry. However, the number of workers employed directly by Internet firms remains miniscule relative to the total workforce and relative to the largest U.S. firms."

Public sector paychecks


At the same time, the study reveals that since 1960, the ratio between average CEOs' pay and the U.S. president's pay has jumped from 2 to 1 to 62 to 1.

And it notes the trend could lead some of the best and brightest political figures to defect into the private sector, or worse yet, never consider a job in the government.

"The increasing gap in pay for top-level public and private sector executives is likely to create a government brain drain that could have a negative effect on public services. This is of particular concern because 65 percent of the government's senior executive service will be eligible for retirement by 2004." Back to top

  RELATED STORIES

CEOs bite the dust - Aug. 2, 2000

  RELATED SITES

The CEO Institute

United for a Fair Economy

Institute for Policy Studies


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