Executive Pay Up 11% in 2011

May 9th, 2011
in econ_news

Income Growth 1Econintersect:  The Wall Street Journal reports that median compensation for the CEOs of 350 major corporations grew by 11% last year.  The median compensation package came in at $9.3 million.  This compares with personal income growth for the entire population for 2010 of 3.9%.  At the end of 2010 the per capita personal income in the U.S. was approximately $42,500.  The ratio of median CEO pay to the per capita individual income now stands at 218:1.  At the end of 2009 the ratio was 209:1 and at the end of 2008 211:1.

Follow up:

Note:  Median incomes are lower than average incomes in the U.S. because of the "fat tail" of high incomes.  So having median CEO pay in the numerator and average personal income in the denomintor is an apples to oranges comparison which understates the real ratio.  The following graph displays how the "fat tail" has grown over the post World War II era:


For three decades following WW II median and average income growth was similar.  From 1980 forward the "fat tail" has grown disproportionately as average income growth has been more than 2.5x as great as median income growth.

Economists have been discussing the situation of ever increasing levels of income going to the top tier, a trend that has been going on for decades.  Many see this as a problem which challenges economic stability and sustainability.  Elliott Morss has discussed this at GEI Analysis.

Corporate profits rose even more than CEO compensation.  From The Wall Street Journal:

The Journal measured CEO pay by total direct compensation, which includes salary, bonuses and the granted value of stock, stock options and other long-term incentives given for service in fiscal 2010. That figure excludes the value of exercised stock options and the vesting of restricted stock. The survey covered the 350 biggest companies that filed proxies between May 1, 2010, and April 30, 2011.

The Wall Street Journal CEO Compensation Study was conducted by Hay Group, a management-consulting firm. The study analyzes CEO pay from the biggest 350 U.S. public companies by revenue that filed their definitive proxy statements between May 1, 2010, and April 30, 2011.

 For the surveyed CEOs, the sharpest pay gains came via bonuses, which soared 19.7% as profits recovered, especially in some hard-hit industries.

Profits and share prices increased even more than CEO compensation. Net income rose by a median of 17%; shareholders at those companies enjoyed a median return, including dividends, of 18%.

A complete table of data for all 350 CEOs is available at The Wall Street Journal

Sources:  Wall Street Journal, Elliott Morss at GEI Analysis, GEI Opinion and St. Louis Fed

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