Per the US Bureau of Labor Statistics, there were 195,530 chief executives in 2018, with a mean annual salary of $200,140. That doesn’t seem unfairly high, given that the mean annual compensation for physicians in 2018 was $299,000. But the CEO pay that gets people riled up isn’t what run-of-the-mill chief executive get, it’s the CEOs pulling in millions working for the top companies. For instance, the $14 million average annual compensation paid to S&P 500 CEOs in 2017.
Let’s put that compensation in context. In 2018, 218 US athletes made at least $14 million, not counting endorsement income - about the same number as CEOS. So why such hand-wringing about the “outrageous” pay of CEOs but virtually none about the pay of professional athletes? Why the double-standard?
Also consider that CEOs are tasked with increasing the market value of their companies. The market value of the Fortune 500 was over $22 trillion in 2018. That’s an average of over $40 billion per company. Let’s assume, for the sake of argument, that the market value of these companies increase $2 billion a year, on average. A $14 million commission on $2 billion isn’t all that generous - less than 1%. Much less than the typical 20% commission made by sales reps.
Ok, but much of the outrage comes from comparing what the tops CEOs make compared to their employees. Some typical headlines:
Keep in mind that these headlines are referring to a small subgroup of top CEOs. And although “1000 percent” sounds bad, it just means 10 times as much, which is about how much more the S&P 500 is worth this days than in the 1950s - in inflation-adjusted dollars.
As for the CEOs making “1,000 times more than their employees”, the story identified just 13 CEOs in this group and their employees included seasonal and part-time staff. I bet there’s way more than 13 NBA players making 1,000 times what the average team employee makes, especially considering that NBA teams hire vast numbers of seasonal, part-time, and temporary workers. For example, Steph Curry’s current NBA salary of $37,457,154 is a 1000 times $37,457 - which in itself is much higher than what Warriors event staff members are paid. And that’s ok with me.
Links:
https://www.multpl.com/inflation-adjusted-s-p-500
http://fortune.com/fortune500/2018/
https://www.bls.gov/oes/current/oes111011.htm
http://time.com/5566816/ceo-pay-income-inequality/
https://www.nationalreview.com/corner/distorted-view-of-ceo-pay/
https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp