Over two-thirds of Americans rate corporate CEO pay as unsatisfactory.
More than 83% of Americans find it significant for businesses to avoid a significant imbalance in remuneration between CEOs and common employees, based on early data from a prospective Bentley University-Gallup poll, shared specifically with CNN. Approximately 56% consider this aspect incredibly important.
It's no surprise that people continue to criticize corporations for their handling of the considerable wage disparity.
Only 13% consider that companies are doing a good or exceptional job in mitigating significant compensation differences between CEOs and average workers. For the third consecutive year, the immense majority (66%) have voiced their dissatisfaction, stating corporations are performing poorly in this regard.
The survey results display a consistent stance across various age groups and even among male and female respondents, regarding both inquiries.
The political spectrum also aligns in this matter: the majority of Democrats (96%), independents (83%), and Republicans (67%) believe it's imperative to prevent large pay gaps.
These findings underscore the resonance the topic of CEO pay has with many Americans, especially considering the widespread economic challenges.
"CEO pay is an atrocious outrage. It profoundly erodes investor trust in our institutions," remarked Nell Minow, Vice Chair of ValueEdge Advisors, a firm that provides guidance to institutional investors on corporate governance issues.
The poll is published as Tesla shareholders prepare to vote on providing CEO Elon Musk a gigantic compensation package valued at more than $40 billion. Tesla will reveal the shareholder voting results on Thursday at the annual meeting.
196 years of wages for a CEO's yearly earnings
The problem lies not only in CEOs' high incomes but in the excessive disparity compared to regular employees' salaries.
It would take the average employee 196 years to earn what their CEO made just in the previous year, as per an analysis conducted by Equilar and The Associated Press.
"Intrinsically, it doesn’t seem fair; how can a CEO make 196 times the average worker?" posed Cynthia Clark, a Bentley University professor of management. "Either the CEO is overpaid, the average worker is underpaid – or both."
This income disparity is growing evermore pronounced.
In 2022, CEOs made 185 times the median employee's wage. The Equilar report shows that CEO pay, which includes stock awards, experienced a 12.6% increase last year.
The Equilar study demonstrates that the median S&P 500 employee received an annual pay increase of roughly $4,300 in 2022. Meanwhile, CEOs' annual pay hike equaled $1.5 million.
Proposed tax on extreme CEO pay
The poll showed hardly any difference in opinions on the issue of CEO pay between the generations.
For instance, 70% of those aged 18 to 29 view companies as performing inadequately in avoiding significant pay disparities. This viewpoint, which mirrors the 63% among those 60 and over, echoes evenly among the age groups.
Similar sentiments were expressed by men and women, with 67% of each gender expressing disapproval.
Democrats were markedly more critical of CEO pay practices compared to Republicans, though.
The poll revealed that 81% of Democrats view companies as doing poorly in this area, while 47% of Republicans share this sentiment. One-third (64%) of independents were critical of the situation.
In January, lawmakers led by Senators Bernie Sanders and Elizabeth Warren introduced the Tax Excessive CEO Pay Act. This legislation would raise taxes on companies whose CEOs earn at least 50 times more than a typical employee.
Certainly, corporate boards are locked in a battle for talent.
They must compete against each other to recruit the CEOs who can help their companies thrive. Ignoring their competitors' lucrative pay packages is not a viable option.
'Highly problematic'
Despite these challenges, even former CEOs are alarmed.
"It's become utterly out of control," asserted Bill George, the former CEO of medical device firm Medtronic, in an interview with CNN. "What really disturbs me is that there's no upper limit on the payments. That's intensely worrying."
In 2023, Broadcom CEO Hock Tan led the S&P 500 CEOs in total remuneration, earning $161.8 million.
Second on the list was FICO CEO William Lansing, who collected $66.3 million.
George, who is now an Executive Fellow at Harvard Business School, was taken aback by Lansing's lavish compensation package.
"How can an organization with less than a $1 billion in sales justify paying $66 million for a CEO?" he asked.
A FICO spokesperson defended Lansing's compensation deal, citing the robust performance of the company's returns over the past decade as well as demonstrating that only $750,000 of his yearly pay was his base salary. "FICO structures executive compensation to align with industry best practices, prioritizing long-term incentives that are tied to the company's performance and shareholder value creation," they said. CNN attempted to collect feedback from Broadcom.
George, former CEO of Medtronic from 1991 to 2001, expressed concern about potential loss of trust within the company due to excessive earnings.
In the present day, there's widespread distrust towards corporate leaders and resentment towards big businesses, with an emerging backlash.
Mandatory Disclosure
Since 2017, public companies have been required to reveal the CEO-to-median employee pay ratio.
The goal of this disclosure, part of the 2010 Dodd-Frank law enacted following the Great Recession, was to shed light on the pay gap and potentially alleviate it.
Clark, a Bentley University professor, remarked that while the requirement was expected to lower CEO pay, the opposite occurred. Instead, it provided CEOs with information about their peers' salaries, fueling further increases.
George concurred, pointing out that CEOs often relish appearing on these highest-paid CEO lists.
Minow, ValueEdge's vice-chair, believed that shareholders, directors, and the media were all complicit in the growing crisis. However, she held the boards of directors primarily responsible for sanctioning these excessive pay deals.
She explained, "There is no justification for CEO pay. It creates a sense of injustice and cynicism that's detrimental."
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The issue of CEO pay disparity is a major concern for many Americans, with 56% considering it incredibly important for businesses to avoid significant imbalances between CEO and common employee salaries. This is highlighted by the fact that it would take the average employee 196 years to earn what their CEO made in a single year.
The growing income gap between CEOs and regular employees is causing concern, with 196 years of wages needed to match a CEO's annual earnings as per an analysis by Equilar and The Associated Press. This highlights the significant discrepancy between CEO pay and the salaries of average workers.
