If you’ve ever worked at a company before, chances are you’ve worked under a Chief Executive Officer (CEO), even if you haven't ever engaged directly. And though you’ve probably wondered how much they were making behind the opaque, mysterious walls of their corner office — in all likelihood, you never got to find out.
These days, we talk a lot about the gender pay gap, but there is another very important gap that we may not consider often enough: The pay gap between workers the C-suite.
Executive salaries are pretty nebulous, and oftentimes employees only have a vague inkling of what the people at the top of a company are really making. But, according to AFL-CIO's 2017 Executive Paywatch study, in 2017 CEOs of S&P 500 Index companies made, on average, 361 times what their average workers made (or a total of $13.94 million in total compensation).
According to the study, the imbalance between the pay of CEOs and workers is actually getting worse. Last year, CEO pay increased 6.4% while production and nonsupervisory workers received a mere 2.6% raise, making, on average, just $38,613.
While the average base pay for a CEO in the U.S. is currently $177,800, according to Glassdoor, the median earnings of the average worker in the United States hovered at around $42,576 as of third quarter 2018, according to the U.S. Department of Labor.
Of course, these are averages, so it’s worth taking a closer look at what these numbers look like in different contexts. According to a Wall Street Journal analysis of 2017 pay for S&P 500 leaders, the top five highest-earning CEOs in 2017 were:
5. Stephen Kaufer, TripAdvisor
2017 salary: $47.9 million
4. Jeff Bewkes, Time Warner
2017 salary: $49.0 million
3. W. Nicholas Howley, TransDigm
2017 salary: $61.0 million
2017 salary: $69.3 million
1. Hock Tan, Broadcom
2017 salary: $103.2 million
While CEO salaries — like any other salary — vary greatly depending on gender, education level, industry, location, race, and countless other factors, the ever-increasing gap between workers and executives is certainly cause for concern. On top of this, even among the highest-paid CEOs, the gender wage gap persists. The Institute for Women's Policy Research found that, among full-time CEOs, women executives still only make 79.5% of what their male counterparts earn.
So, what's the solution? Unfortunately, excessive CEO salaries are hardly a new problem and, in many ways, wage inequality is just par for the course of capitalism, but there are some ways to get things slightly more under control.
Shifting culture, such as moving away from automatic bonuses for doing the very minimum, or thinking about putting restrictions on stocks, could help break this problematic cycle. Also, some experts have suggested a federal luxury tax, which would put a tax on executive pay over a certain amount. Another option might be giving shareholders more power in decision-making, such as voting on executive pay. Either way, there's no question that something needs to be done. However, whether or not companies will choose to reform their ways is another matter entirely.