CEO pay surged almost 16% in 2020, research says – dwarfing the 1.8% bounce in common employee compensation

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

CEO compensation rose 15.9% from the pandemic as the recovering stock market boosted compensation packages, the left-wing Economic Policy Institute said in a blog post on Thursday. This is an acceleration from the 14% increase in 2019, despite COVID-19 causing turmoil in the global economy. EPI cited 281 submissions from large companies in its preliminary report.

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

However, CEO salaries largely declined over the course of the year. The average salary for executive directors fell 5.2%, according to EPI, as companies paused salary increases during the health crisis.

However, a broader metric shows that the meteoric rise in the stock markets by 2020 has more than made up for the slump. Realized direct compensation – which includes salaries, bonuses, long-term incentive payouts, stock options, and vested stock awards – rebounded over the past year as stocks rebounded from their pandemic lows. Among the 281 early reporting companies analyzed, realized compensation increased from $ 18.5 billion in 2020 to $ 21.4 billion.

“The offer by CEOs to forego salary increases during the pandemic was largely symbolic,” wrote EPI colleague Lawrence Mishel and research assistant Jori Kandra. “Salaries have been stable, but many CEOs have made a profit by redeeming stock options and receiving vested stock awards, which exacerbated the income gaps uncovered last year.”

The rise in CEO compensation had its own differences. Realized CEO compensation increased nearly 29% for companies retaining their CEOs. However, the median increase for such companies was only 5.2%, suggesting that a handful of CEOs with compensation growth of 100% or more skewed the average through 2020.

EPI’s report comes from the fact that large employers are raising their minimum wages to attract workers. Companies ranging from Chipotle and McDonald’s to Under Armor to Amazon have hiked their average wage levels in the past few weeks and announced plans to hire more workers as consumer demand picks up.

Companies are in a rush to hire workers after disappointing April jobs report raised concerns about labor shortages. Republicans blamed the lack of unemployment benefits, arguing that the relief prevented Americans from returning to work. Democrats countered with full support for the program, citing decades of stagnant wage growth as a reason for companies to raise wages.

“You can see that some very large employers are already starting and that is good for the country,” Anita Dunn, a senior adviser to President Joe Biden, said in an interview with the New York Times. “And that is certainly in line with President Biden’s belief that working Americans, middle-class Americans who have not benefited from the trickle-down economy for the past 40 years, deserve a raise.”