Median pay for CEO's of companies on the S&P 500 rose in 2018 from $11.7 million to $12.4 million. The increase was a result of strong corporate profits and a good year for the stock market. This increase means that many CEO's are now making more than $1 million a month. The average pay raise for this group was 6.4%, while wages rose 3.5% for the average worker in the US. This discrepancy is interesting to me because in 2018 did CEO's improve there productivity by a little less than double what the average worker did. I would argue they most likely did not and the pay increase should be a similar percentage to the average.
They got this raise despite the very poor performance of the market in December, which wiped away most the gains for the year and made the market return poor for many investors. Yet the CEO's still received large pay raises.
The question is how much value does management of a company produce. I would assume its much greater than an individual worker and that the group of people who have the ability to manage a large publicly traded company is very small as well. So it makes sense that their wages would be much greater than the average person. However, why are they still getting large bonus when they do not produce a ton of value for shareholders, like in 2018 and why was the group pay raise in terms of percentage much greater than the average persons.
https://www.wsj.com/articles/many-s-p-500-ceos-got-a-raise-in-2018-that-lifted-their-pay-to-1-million-a-month-11552820400
3 comments:
Very interesting article Jack. It's funny how wage growth for people already making millions of dollars grows faster than the factory worker for that same company. I agree that management probably wasn't 2x as efficient as the workers. Although, there could be examples of CEO's from emerging markets that deserve a raise, but your info is based off the S&P. Your point about market performance in December bringing returns down also raises the question on why the growth was so high. I guess we'll have to see where 2019 brings the CEO salaries, but I have a wild idea that their wages wont decrease too much.
I think you do bring up a good point Jack. I don't think they were so productive that they truly earned that large of a raise, especially with the poor market performance in December. It makes me think that their wages should be tied more to the companies earnings and perhaps the Board of Directors should take another look at why they truly deserve those raises. I don't think the companies will receive much backlash from this, however. Like Antonio said, their wages probably will not decrease anytime soon.
I understand that competent upper management may be hard to come by and is extremely valued, but if the company performs poorly the last people to get raises should be the management. Raises for management should somehow be proportionally tied to that of the company's average worker. If the company is doing well enough to provide more pay for their CEO, the workers who made it possible should also definitely get a raise.
Post a Comment