But it turns out those critics weren’t being critical enough. Now it’s time to revise their analysis. CEO pay no longer rises with the stock market; it rises well in excess of the stock market—more than one-third faster, according to a new report by Economic Policy Institute (EPI) research director Josh Bivens and research assistant Jori Kandra. It’s still true that a typical pay package for the CEO of a major corporation outperforms whatever company the CEO happens to run. But in addition to that, it outperforms the entire frigging stock market. You want to keep your retirement money safe? Sure, an index fund is a fine investment for now. But once we figure out how to corral America’s top CEOs into an initial public offering (IPO) and convert their collective persons into stock, pull your money out of that index fund and put it into CEOs, Inc. You won’t be sorry.
That isn’t the first time EPI has reported that capitalists out-earn capital. It’s found CEO pay exceeding stock market growth for several years now. But we’ve all become so inured to outrageous stories about CEO pay that this finding didn’t attract much attention. I didn’t notice it until this past week. The concept so astonished me that I checked EPI’s math. From 1978 to 2021 realized CEO compensation increased, EPI says, by 1,460.2 percent, adjusted for inflation. How does that compare to stock market performance? Well, from January 1978 to January 2021 the Dow Jones Industrial Average rose, adjusted for inflation (and assuming no dividend reinvestment) by 842.814 percent. The S&P 500 rose 904.378 percent. These rates of growth are impressive, but they are much slower than 1,460 percent.
Thomas Piketty shocked the world by suggesting that r > g, where r is capital accumulation and g is economic growth. EPI’s contribution is that c > r, where c is CEO compensation and r is capital accumulation. Capital good; capitalist better.
But EPI’s latest report demonstrates that CEOs make even this plutocratic 0.1 percent look like poseurs. As a group, CEOs get paid nearly seven times as much as the 0.1 percent, and their pay is rising at a rate that’s nearly four times as fast. As Bivens and Kandra point out, it’s a serious insult to the 0.1 percent to suggest that higher and faster-growing pay for CEOs is even vaguely meritocratic. You want to tell a guy earning $3 million bucks a year that he is mediocre compared to a CEO, be my guest.
“The growing pay differential between CEOs and top 0.1 percent earners,” Bivens and Kandra write,
does not reflect the greater productivity of executives but the specific power of CEOs to extract concessions—a power that stems from dysfunctional systems of corporate governance in the United States. Because so much of CEOs’ income constitutes economic rent, there would be no adverse impact on the economy’s output or on employment if CEOs earned less or were taxed more.”