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Worker pay went up just 1.8% in 2020. CEO pay increased nearly 16%

At the start of the pandemic, some CEOs announced, to much fanfare, that they’d give up their salaries in order to protect their companies from layoffs or closures. But those gestures did little to curb the trend of soaring CEO earnings (because salary is often just one component of CEO compensation). In 2020, what CEOs took home rose nearly 16%, according to preliminary data, while the average worker’s compensation rose just 1.8%.

Those figures come from a preliminary report from the Economic Policy Institute, which each year reports on CEO compensation trends based on data from the 350 largest firms. That annual report uses information these firms file by June, but 281 of those 350 firms have already reported their CEO compensation for 2020, so Lawrence Mishel, distinguished fellow at and former president of the EPI, decided to put out some analysis early. “We think this is a proper early look at what we can expect,” he says. And what he’s expecting is fast CEO compensation growth: “We would estimate that CEO compensation will hit, by far, its historic peak in 2020.” 

That means the ratio of CEO pay to worker pay could peak too. In 2019, CEOs earned 320 times more than a company’s typical worker. The full picture of how that ratio will change in 2020 isn’t yet clear, since all the same firms have not yet reported their CEO compensation, but there is evidence it’s rising. In 2019, the firms that reported early for this preliminary report had a CEO-to-worker compensation ratio of 276.2-to-1; now, it’s 307.3-to-1. For the firms that retained their same CEO all year, the difference was even greater: 341.6-to-1. 

This picture of rising CEO pay “conflicts with the struggles that most people had” in 2020, Mishel says, but it’s also not all that surprising, given the growth of the stock market. There may be something a bit sneakier going on too. People who defend sky-high CEO compensation often point to the fact that these business leaders are paid for their performance. “But there’s a lot of documentation of firms changing their performance metrics to ensure that CEOs got big pay increases, even though the predetermined metrics would not have allowed that,” Mishel says.

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