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Remuneration 'In Excelsis' or Executive Excess? (3 Oct 2005)
2004 was a banner year for CEOs and a dismal year for workers, according to a report released today jointly from the Institute for Policy Studies and United for a Fair Economy.  The ratio of average CEO pay ($11.8 million) to worker pay ($27,460) went up from 301-to-1 in 2003 to 431-to-1 in 2004. At the 34 publicly traded US corporations among the 2004 top 100 defense contractors with 10% or more of their revenues from defense contracts average CEO pay increased 200% from 2001 to 2004, versus 7% for all CEOs.

The highpoint of excessive top management pay occured in 2000 when the ratio was 525-to-1 whereas back in the modest days of 1982 the ratio was a mere 42-to-1 before breaching the 100-to-1 hurdle in 1990. 

Since the September 11disaster the ratio between median pay for defense CEOs and pay for military generals has nearly doubled to 23-to-1, up from 12-to-1 just three years earlier. The pay ratio between defense CEOs and army privates soared to 160-to-1, up from just 89-to-1 in 2001. The report reviewed trends in CEO pay and highlighted five types of excessive pay:
  • Pension underfunders: The CEOs of those firms with the most underfunded pensions, on average, received 72% more than the average large company CEO.
  • Tax dodgers: 46 large companies paid no federal income tax in 2003, despite collectively earning $30 billion in profits. Some of the savings wound up in the pockets of their CEOs, who made $12.6 million in average pay in 2004.
  • Book cookers: In the last ten years, CEOs of firms with shady accounting appeared 18 times on the top ten lists of highest paid executives. This includes leaders whose companies were either later found to have committed fraud or were forced to make material restatements of earnings to correct previous overstatements of profits.
  • Stock tankers: If you had invested in the stock of the company led by the year’s single highest paid CEO each year since 1990, you actually would have lost money. You would have done nearly six times better by investing in the S&P 500 index. A $10,000 investment in such a Greedy CEO portfolio in 1991 would have decreased in value to $8,079 by the end of 2004, while a similar investment in the S&P 500 would have increased to $48,350.
  • Gross pay: Over the last 15 years, the cumulative pay of the ten highest paid CEOs in each year together totals more than $11.7 billion.
Link to report news release and pdf download.