Leave it to the right-wing neoconservatives at the American Enterprise Institute (AEI) to defend the indefensible: runaway CEO pay levels. Last week, the AFL-CIO’s Executive Paywatch website announced that S&P 500 company CEOs made on average $13.5 million in total compensation in 2014, an amount equal to 373 times the average production and nonsupervisory worker’s pay.
AEI’s pathetic response? AEI claims the AFL-CIO’s data is an “exaggerated, bogus ratio” and that average CEOs really only make $180,700 a year. To support this outlandish claim, AEI cites the Occupational Employment Statistics survey by the federal Bureau of Labor Statistics (BLS). But closer scrutiny of this BLS survey data reveals that AEI is way off base in claiming that it represents the pay of CEOs.
Most glaringly, the data that AEI cites for CEO pay ignores the largest and most lucrative categories of compensation that corporate CEOs receive. The BLS survey only measures hourly wages, not other forms of pay, including profit-sharing payments, stock bonuses or perquisites. For S&P 500 company CEOs, their base salaries make up less than 10% of their total compensation.
There are other problems with citing the BLS Occupational Employment Statistics survey for CEO pay levels. The BLS survey is self-reported data. It surveys workplace establishments, not entire companies. And its definition of “chief executives” includes functions performed by various senior executives, not just CEOs. All these factors suggest that the BLS survey is not a reliable indicator of CEO pay levels.
The AFL-CIO Executive Paywatch focuses on CEO pay of S&P 500 companies because these companies are the largest employers in the United States. Moreover, the S&P 500 Index represents about 80% of the total U.S. stock market's value. The AFL-CIO’s ratio of CEO-to-worker pay is based on a methodology that BusinessWeek published for many decades in its annual executive pay report.
Nice try, AEI. Your lies can’t hide the fact that CEO pay is out of control.