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CEOs were paid less last year

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Average CEO pay for the top 350 firms in the USA was US$15.5 million in 2015, according to a new report released by the Economic Policy Institute.

While the number is still astronomical for the average Joe, it is actually down from the US$16.3 million that CEOs pocketed in 2014.

US$15.5 million represents a 276 to 1 pay ratio to the typical worker, down from the 302 to 1 ratio in 2014.

Economist Lawrence Mishel, who led the study, was surprised that CEO compensation was down despite not having a major economic crisis like the tech bubble burst in 2000 and the 2008 financial crisis.

The report took into account the salary, bonuses, long-term incentive payouts, restricted stock grants and stock options that CEOs receive and concluded that the drop in CEO pay is related to the drop off in stock options.

ALSO READ: Why CEOs need to stop earning outrageous sums of cash

This alone accounted for more than 80% of the decline in pay between 2014 and 2015.

It also found that CEO pay up 46.5% since 2009

“Skyrocketing CEO pay isn’t about the market for talent—it’s about what executives can get away with,” said Mishel in a press release.

“Our research suggests that it has very little to do with CEOs being more talented,” said Mishel in an interview with PBS NewsHour.

“Pay is tied to the stock markets, and it’s not tied to: did the price go up in my firm more than in firms that I compete with?”

“Every firm believes that their CEO is special and therefore needs to be paid above average.  And there’s very little push back in terms of the governance and procedures within firms.” he added.

To prevent outsized CEO pay, Mishel suggests policies that would include removing the tax break for performance pay and reinstating higher marginal income tax rates at the top.

Image: 123RF

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