Wachovia Information Paper

Are American CEOs Paid Too Much?

Are American CEO's overpaid? In my opinion, they are. In America today, CEO's of various companies are known for their high position and for their high salary. According to the Business Journal, the average CEO's of an S&P 500 firm earned $2.7 million yearly in 1992. By 2000, the average pay for these CEOs increased to more than 400 percent totaling to approximately $14 million per year. When compared to average workers, the pay increase is even more dramatic. Is this increase justifiable?

In 1992, CEOs were paid 82 times the average of blue-collar workers. In 2004, this amount increased to over 400 times. According to the Bureau of Labor Statistics, the average production worker fared less well in 2003. Their annual pay was $26,899 in 2003, up just 2.1% from 2002. The average worker took home $517 in their weekly paycheck in 2003; the average large company CEO's took home $155,769 in their weekly pay. If the minimum wage had increased as quickly as CEO pay since 1990, it would be $15.71 per hour today. This is more than three times the current minimum wage of $5.15 an hour. While workers are increasingly anxious about their job security, and how they will pay the rising costs of everything from health insurance to housing, from college to gasoline, corporate executives continue to distance themselves from the cares and worries of those they lead. It sends a poor message to demand cost cutting from the factory floor, while costs in the executive suite are left to soar.

CEO's claimed that their jobs are highly skilled, difficult and very stressful. But are they 400 times as skilled as the average workers? Are their jobs 400 times as difficult and stressful? The answer to these question is no. I think all employees experience a "great deal" of stress from their own work. I also think that most of the outstanding employees are paid too little. Despite their hard work and tremendous value to the company, most top performers are paid at or below the average income level.

CEO's also claimed that their decisions can affect the lives of thousands of people both inside and outside the firm. What about the decisions of lower-level workers? To me, both decisions can be equally important but what about the rewarded for their hard work

The average CEO's make roughly 53 times what medical doctors, military generals, or federal district court judges make (Bureau of Labor Statistics, 2004). Is this justified? No, I do not believe