Income disparity – CEO pay

Income disparity in the US, in particular of top executives such as CEO level (Chief Executive officers), is at ridiculous levels and the problem is getting worse and worse. Now I am all in favor of being well compensated for hard work, being rewarded for innovative ideas, people taking chances by investing, and similar things. They should be compensated more than others, but come on now…we are at outrageous levels.

I think taking a chance on business, investing, coming up with a successful business idea and such be rewarded in the form of higher compensation. The fact is people that do these things are taking chances with their money and time. Why take a chance if there is no financial upside? However many CEOs earn more money in one year than most people can expect to earn in hundreds or thousands of years. This is not just true in America (though the US may be the worst) but it is also true worldwide. This income disparity is not right.

Some of the stats on CEO pay and disparity

In the US, CEOs make over 265 times the average workers wage. Higher earning CEOs make in 2 days what a typical worker will make in the entire year. This means the average employee will need to work about 265 years (three centuries!) to earn what a CEO does in one year. Minimum wage jobs are even much worse…a McDonalds worker may need to work up to 3000 years.

  • In India, CEOS average 229 times workers annual pay.
  • In the United Kingdom, CEOs average 201 workers annual pay.
  • In Germany, the ratio is 136 to 1, Canada 144 to 1, Mexico 62 to 1, etc. etc. It goes on and on. How much is too much?

The problem is getting much worse as well. In 1980, CEOs in the US earned about 33 times the average worker salary, and now it is 265 as indicated. So the gap is now 8 times larger then it was in 1980…”just” 39 years ago.

Now I am all for people being well compensated (even very highly) for working hard, starting a business, investing, etc. The fact is they need to earn more. As why say invest money in starting a business (and potentially losing your entire investment) if you would not be “rewarded” if the business pans out. I sacrificed so much, including pushing my body until it “broke down” in panic attack, to start and grow my business, invest in stocks, etc. There should be some reward/compensation for that. While of course there are the benefits of creating something, challenging yourself, and taking pride in starting a business, i think compensation should be an upside as well.

Or why work hard, get an education, etc. if you will not be well compensated. Or why invest in a stock (and potentially lose all of your money) if you do not have the chance to be “rewarded”. There should be more than just the “satisfaction” of doing it.

So I think people really do need to have the potential to earn more for working hard, investment risks, starting businesses, going to school for advanced degrees, etc. But what is reasonable vs. what is ridiculous when it comes to income disparity? I think a CEO making hundreds of times more than a typical worker is ridiculous.

I have worked in the corporate world for many years, working myself up to high level positions. I read businesses articles, follow companies closely, mentor people, etc. I have learned that many CEOs (most) can even be considered to be figureheads…and most of the decisions (and of course all of the work) is completed by balance of employees in a company. So why are they paid hundreds of times more than the people who make the company successful?

I also think that a founder, who maybe now is a CEO, should be more highly compensated than someone who just is hired for an existing company. If you have an idea and found/start a company, that is much riskier than someone who is hired into one. For example, Jeff Bezos, Anne Wojcicki, Bill Gates, Mark Zuckerberg, Sara Blakely and others who started a company from scratch should be higher compensated than say the last CEO of GE who was hired into a 200 year old company. Heck even let the founders be “rich”…whatever their definition is. But the income disparity is way out of whack today.

Founders often come up with an innovate idea, or a “twist” to something already out there. They take more risks. In general, they work harder. They generally make many sacrifices to their life to start and try to grow a company and have much more at stake financially, as I know on a first hand basis. All of that should allow a founder who is a CEO to be more highly compensated.

Anyhow, income disparity is a major problem. I do not understand how CEO pay has become so out of whack with the average workers…especially when considering “workers” are what keeps a company going. What do you think on this topic? We will create a forum poll for comments and feedback.

Comments

  1. Andrea Clements

    I work 50 hours. Boss treats me badly at my job. Me and my family work for peanuts and these big whigs make so much. Who do they think they are? Boss man at my job I barely see and he sometimes yells at me. We worker bees need higher wages and take the money from these big whig CEOs that do no work.

  2. Archie

    I am doing all I can to make end meets. But I am struggling with my wife. Health Insurance F**** pay for nothing. I have a full time job. Why does my CEO make much more? I make $30 hour for Beacon and live in Northern Virginia and it goes no where. Mr Isabella CEO makes 3 million a year and my VP boss makes over a million.
    They have now given me an eviction notice in McLean. So please let me know if anyone can help before next month. I do not want to become homeless and I’m worried sick and very scared, not like Isabella.
    Sincerely and God Bless,

  3. Don

    Many personal finance websites say too often that “poor” people blame their environment (the things situation they find themselves in) rather than doing something about it. However, as you say, some people such as CEOs (like at my company) get fortune or wealth from actions that they do not deserve or worked for, and those forces are out of our control in current system. The system does not work when that happens.

  4. justin glenn

    Am “slaving” for a wage. CEO at my company does nothing. I’m a single father of 3 daughters and 2 boys. I work but I just don’t make enough to pay the bills. The “man” who makes this money should be illegal as they should not make thousands of times more than me when I just want to have kids with my wife and keep a roof over the house and food on the table. This CEO abuse needs to stop.

  5. Crystal

    Very few Americans have a problem with people like athletes, singers, movie stars and entertainers making crazy money and tens of millions in income. Why are CEOs a problem? If a person heads a national or global company and is RESPONSIBLE for and EMPLOYING tens of thousands of workers and those workers earn a living, then it is suddenly wrong to pay a CEO for that tremendous responsibility? But a singer or someone in a 2 hour long movie can make millions and no one complains about that inequality?

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