Outside InHow excessive CEO pay helped fuel the rise of Donald Trump, Brexit and an anti-capitalist movement
- Efforts to curb excessive CEO pay have failed, even as politicised grievances over inequality have gained momentum
- Superstar CEO packages have inflated since the late 1990s, while average US household incomes have stagnated
Plato apparently insisted 2,000 years ago that no one in the ancient Greek economy should earn more than five times the average working person. George Orwell argued in 1941 that there was “no reason that 10 to one should not be the maximum normal variation”. Jump forward to the early 1970s and management guru Peter Drucker said that 20 to one from top to average was the right range between average workers and the CEO.
I wonder what view they would take of today’s average American CEO, earning US$13.1 million a year, almost 350 times the average US worker’s wage? Or of the UK, where average chief executive pay amounts to around £4.5 million (US$5.71 million)- 129 times the median employee?
Our superstar top executives would of course claim that the difference is well justified, and that their complex bundles of salary, bonus, share options and the like are hard-earned and well benchmarked against superior company performance.
But a growing body of research says their super-stuffed packages are impossible to justify. Is it really plausible that when that average US CEO walks into the office tomorrow, the first day of 2019, he or she deserves to earn in that single day the same sum that his average staff take the whole of 2019 to earn?
At what point, in simple practical terms, does it become impossible to spend such colossal pay packages? At what point does pay become more a matter of status than need? To what extent is it true that, however much an executive is paid, it will never be enough unless others are paid less?
