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Week of 3.16.07

Facts & Figures: Executive Pay

  • The average CEO of a company with at least $1 billion in annual revenue made about $400 more in one day in 2005 than the average worker made in a year.

  • The average worker earned $41,861, while the average CEO made $10.9 million, or 262 times that of the average worker.

  • From 1992 to 2005, the average CEO saw his or her pay rise by 186.2%, while the median worker saw wages rise by 7.2%.
The ratio of total CEO compensation to average worker pay rose from 24:1 in 1965 to 262:1 in 2005
*Dates before 1999 are not contiguous.
Source: Economic Policy Institute 
  • CEOs in the U.S. earn more than two times the average of CEOs in other wealthy countries. But other countries are catching up: Since 1988, CEO pay in many countries rose as fast as or faster than in the United States.

  • Ninety percent of institutional investors surveyed in 2005 said the current compensation system overpays executives, and 85% said it has hurt corporate America's image.

  • A 2006 Blooomberg/L.A. Times poll found that 81% of Americans thought executives were overpaid.

  • In his January 2007 "State of the Economy" speech, President George W. Bush warned against excessive CEO salaries and bonuses, adding that CEO compensation should be tied to performance.

  • Fourteen percent of option grants to top executives between 1996 and 2005 were "backdated or otherwise manipulated."

  • In the first 68 days of 2007, investors had submitted 266 shareholder proposals related to executive pay, almost double that of the same period one year earlier, according to Institutional Shareholder Services.

  • The House Financial Services Committee has introduced legislation that would allow shareholders an opportunity to approve or disapprove companies' executive pay practices. The bill will not set any limits on pay.

  • CEOs of the top 15 U.S. oil companies are paid 281 percent that of the average CEO in a comparably sized businesses. The top 15 U.S. oil CEOs received an average of $32.7 million in 2005 compared to an average of $11.6 million for CEOs
    operating in a similar market size.

  • The highest paid executives in 2005 were, in order: Eugene M. Isenberg, chairman and CEO of Nabors Industries, Inc., an oil and gas contracting services company ($71.4 million); Ray R. Irani, president and CEO of Occidental Petroleum ($70 million). Lew Frankfort, chairman and CEO of Coach, luxury accessories, ($62.3 million); and Barry Diller, chairman, director, and CEO of InterActiveCorp, a high tech company ($61.5mil).
Sources:

Economic Policy Institute: "CEO Pay" [pdf]

Harvard law: "Growth of Executive Pay" [pdf]

Watson Wyatt Worldwide: "Corporate Directors Give Executive Pay Model Mixed Reviews, Watson Wyatt Survey Finds"

Social Science Research Network: "CEO Compensation and Director Networks"

University of Iowa School of Business: "Backdating of Executive Stock Option (ESO) Grants"

United for a Fair Economy: "Executive Excess 2006" [pdf]

Social Science Research Network: "Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns"

Sauder School of Business: "Decoupling CEO wealth and firm performance: the case of acquiring CEOs" [pdf]

House Committee on Financial Services: "Frank Introduces legislation to Allow shareholders to vote on executive pay"

Chicago Graduate School of Business: "How has CEO turnover changed" [pdf]

Money: "10 Highest-paid Executives"