Thursday, November 21, 2013

What if CEOs muddled by on only $1 million a year?

Lately, there's been a lot of buzz in the press about limiting executive compensation. In a webinar I recently attended, the speaker said, as we've so often heard from various pundits, that in the U.S., CEOs make 370 times the average worker's salary, versus European CEOs who make 20-30 times the average worker's salary.

I read a news article today that referred to GMI's 2012 CEO Pay Survey, so I clicked on the link to the survey and skimmed it. It made me wonder how many  "regular" jobs are represented by executive compensation in excess of 20-30x an average worker’s salary. I didn't want to find the average worker's salaries for all of those companies, so I just looked up how many wage earners (those at least 16 years old) are in an average U.S. household and what the median U.S. household income is. Close enough.

So, by my very rough calculations, if total realized compensation by CEOs of the 1,160 S&P 500/Smallcaps/Midcaps surveyed by GMI were 20x the median U.S. household income (which means the CEOs would still make >7 figures) rather than 177 times (note, not 370 times, at least by my calculation), their excess compensation represents enough jobs (nearly a quarter million) to reduce U.S. unemployment by roughly 0.2%. Putting that in perspective, the "excess" compensation of 1,160 captains of industry could bring us 15% closer to the unemployment rate deemed “healthy” by experts (now = 7.3%, healthy = 6%)

Of course, the link between executive compensation and unemployment is not as simple as that, if there even is a link at all. But, it is interesting to think about.  

No comments: