A nice synchronicity with the announcement of Senator Elizabeth Warren’s proposed Accountable Corporations Act. The article below, says that stock grants and stock options “can lead to substantial paydays for CEOs when companies perform well in the market.” We note that they lead to substantial paydays when the market as a whole performs well, even if their companies underperform, and we reiterate our view that no option grant has any legitimacy unless it is indexed to the peer group or the market.
The top executives of America’s biggest companies saw their average annual pay surge to $18.9 million in 2017, according to a report released Thursday, fueling concerns about the gulf between the nation’s richest and everyone else.
The dramatic 18 percent jump in chief executive pay came as wages for American workers remained essentially flat, pushing the gap between executive compensation and employee pay to its highest point in about a decade.The rise in executive pay shown in the report by the Economic Policy Institute, a left-leaning think tank, is driven largely by the big increases in the stock market over the past year. The bulk of CEO compensation is made up of stock grants or stock options, which can lead to substantial paydays for CEOs when companies perform well in the market. The Standard & Poor’s stock market index jumped 14.5 percent in value from 2016 to 2017 when adjusting for inflation, EPI said.
From 2009 to 2017, average pay for the nation’s CEOs jumped by $7.8 million, or by 72 percent, according to the report. Over that period, the average wages and benefits for a typical American worker rose from $53,400 to $54,600, or by about 2 percent, the report said.
“It speaks to the degree the economic recovery is unbalanced,” said Larry Mishel, an economist who has tracked the CEO-worker pay ratio for two decades and co-authored the report with Jessica Schieder.