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Gap Between Employees and CEOs Hits a Multiple of 200

Money, Old man Retirement

photo: Pexels by Andrea Piacquadio

The disparity between the income of everyday people in America and corporate leadership keeps on growing. In 2023, corporate CEOs made 200 times the salary of the average worker, reported AP. A survey of the heads of S&P 500 companies showed they collectively had a 13% pay increase last year.

This comes as little surprise. There has been reporting on the increasing pay gaps in America for decades now. The gap between the people at the top and the average person gets wider every year. Even in the past year, while the world continued to suffer from problems with inflation, CEOs got pay raises in percentage points that far exceeded the average increase in wages across the United States.

CEO pay surged significantly in 2023, with the median CEO compensation package reaching $16.3 million, a 12.6% increase. This stands in stark contrast to the more modest gains for private-sector workers, whose wages and benefits only grew by 4.1% over the same period. The pay gap is so wide that at half of the surveyed companies, the median employee would need nearly 200 years to earn what their CEO makes in a single year.

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“In this post-pandemic market, the desire is for boards to reward and retain CEOs when they feel like they have a good leader in place,” Kelly Malafis, founding partner of Compensation Advisory Partners in New York told AP. “That all combined kind of leads to increased compensation.”

However, AP also reported that in response to shareholder pressure, CEO pay is increasingly linked to company performance. A significant portion of their compensation now comes in the form of stock awards. These awards typically vest over several years, meaning CEOs can’t access them unless the company achieves specific goals, such as a rising stock price or improved profits. This shift is reflected in the growing value of stock awards, which rose by almost 11% last year, compared to a more modest increase of 2.7% for bonuses.

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