Mind The Gap- The Widening, Worsening Pay Gap Between the CEO and the American Worker

Travis's picture

According to the Institute for Policy Studies (www.ips-dc.org) which has been tracking executive pay since 1994, there's a widening compensation gap between U.S. CEOs and American workers, and there's no end in sight.

In a brief article on the topic by Yahoo!'s Heesun Wee, the average ratio between salaries for CEOs and the American worker in 2007 was 344 to one.  This figure dipped slightly last year, 2008, to 319 to one.  But according to the Institute, this figure is set to rise, which, according to IPS's director John Cavanagh is "really worrisome."

"If nothing is done -- if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies," Cavanagh proclaims. 

The topic of CEO pay in Washington may not currently be on the front burner, as the markets have rallied and political focus has shifted toward healthcare reform.

Cavanagh supports the pay chasm as a critical issue, the gap is "still very, very high" higher than most other countries "decent and in sync with democracy."  (His words, not mine).  He proclaims that if you go back a generation in America, on average, the CEO to worker pay gap was about 30 to one. 

According to another article published by the IPS- for various reasons, beyond the harsh statistics, a few bills in Congress (buried somewhere, for sure) may hold a hint for things to come. 

One such bill, sponsored by Rep. Jan Schakowsky of Illinois "would extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior."  Okay, so what?  But one of the said "benchmarks" is not paying any executive more than 100 times the wage that goes to the company's lowest-paid worker.  Legislations' message to Corporate America- if you overpay your CEO- you're not getting taxpayer dollars.

So if you aspire to become CEO one day.  You may only make 100-times your current salary and not 300. 

What can I say- climbing to the top is not what it used to be.