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The Outrageous Ascent of CEO Pay

By       Message Robert B. Reich     Permalink
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Reprinted from Robert Reich Blog


The Securities and Exchange Commission just ruled that large publicly held corporations must disclose the ratios of the pay of their top CEOs to the pay of their median workers.

About time.

For the last 30 years almost all incentives operating on American corporations have resulted in lower pay for average workers and higher pay for CEOs and other top executives.

Consider that in 1965, CEOs of America's largest corporations were paid, on average, 20 times the pay of average workers.

Now, the ratio is over 300 to 1.

Not only has CEO pay exploded, so has the pay of top executives just below them.

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The share of corporate income devoted to compensating the five highest-paid executives of large corporations ballooned from an average of 5 percent in 1993 to more than 15 percent by 2005 (the latest data available).

Corporations might otherwise have devoted this sizable sum to research and development, additional jobs, higher wages for average workers, or dividends to shareholders -- who, not incidentally, are supposed to be the owners of the firm.

Corporate apologists say CEOs and other top executives are worth these amounts because their corporations have performed so well over the last three decades that CEOs are like star baseball players or movie stars.

Baloney. Most CEOs haven't done anything special. The entire stock market surged over this time.

Even if a company's CEO simply played online solitaire for 30 years, the company's stock would have ridden the wave.

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Besides, that stock market surge has had less to do with widespread economic gains that with changes in market rules favoring big companies and major banks over average employees, consumers, and taxpayers.

Consider, for example, the stronger and more extensive intellectual-property rights now enjoyed by major corporations, and the far weaker antitrust enforcement against them.

Add in the rash of taxpayer-funded bailouts, taxpayer-funded subsidies, and bankruptcies favoring big banks and corporations over employees and small borrowers.

Not to mention trade agreements making it easier to outsource American jobs, and state legislation (ironically called "right-to-work" laws) dramatically reducing the power of unions to bargain for higher wages.

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http://robertreich.org/

Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.


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