CEO pay surged nearly 16% in 2020, study says — dwarfing the 1.8% jump in average worker compensation

Add pay growth to the list of inequalities exacerbated by the pandemic.

CEO pay skyrocketed 15.9% through the pandemic as the rallying stock market boosted compensation packages, the left-leaning Economic Policy Institute said in a Thursday blog post. That marks an acceleration from the 14% jump seen in 2019 despite COVID-19 roiling the global economy. EPI cited 281 filings from large firms in its preliminary report.

Conversely, annual compensation for the average American worker rose just 1.8% in 2020. The widening pay gap is captured in EPI’s CEO-to-worker compensation ratio, which rose to 307.3 last year from 276.2 among early reporting companies.

To be sure, CEO salaries broadly shrank through the year. The average salary for chief executives fell 5.2% as businesses paused pay hikes during the health crisis, according to EPI.

Yet a broader measure shows the stock market’s meteoric rise through 2020 more than made up for the slump. Realized direct compensation — which includes salary, bonuses, long-term incentive payouts, stock options, vested stock awards — rallied last year as stocks rebounded from their pandemic lows. Among the 281 early reporting firms analyzed, realized compensation rose to $21.4 billion from $18.5 billion throughout 2020.

“The offer by CEOs to forgo salary increases during the pandemic was largely symbolic,” EPI fellow Lawrence Mishel and research assistant Jori Kandra wrote. “Salaries were stable, but many CEOs pocketed a windfall by cashing in stock options and obtaining vested stock awards, compounding income inequalities laid bare during the past year.”

The surge in CEO compensation had disparities of its own. CEOs’ realized compensation jumped nearly 29% at firms that retained their chief executives. Yet the median increase at such firms came in at just 5.2%, suggesting a handful of CEOs with 100% compensation growth or greater skewed the average through 2020.

EPI’s report comes as large-scale employers lift their minimum wages in a bid to attract workers. Firms ranging from Chipotle and McDonald’s to Under Armour and Amazon have lifted their average pay levels in recent weeks and announced plans to hire more workers as consumer demand strengthens.

Businesses have been rushing to bring in workers after the disappointing April jobs report raised concerns around a labor shortage. Republicans blamed the shortfall on bolstered unemployment benefits, arguing the relief disincentived Americans from returning to the labor force. Democrats countered with full-throated support of the program and pointed to decades of stagnant wage growth as reason for businesses to raise wages.

“You see some very large employers already starting to do that, and that’s good for the country,” Anita Dunn, a senior advisor to President Joe Biden, said in an interview with The New York Times. “And that is certainly in line with what President Biden believes, which is that working Americans, middle-class Americans who haven’t been the beneficiaries of trickle-down economics for the last 40 years, deserve a raise.”

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