Report: E-greed, Public/private and CEO/Worker Gaps

Press Release
August 30, 2000
For immediate release
Contact: Betsy Leondar-Wright, 617-423-2148 x13

CEO/Worker Pay Gap: The Neglected Campaign Issue
Labor Day Report Spotlights E-greed and Public/private Gap

Download the study (PDF, 226K)

A new study reveals growing pay gaps between workers and CEOs and between CEOs and government officials that are increasing inequality and undermining democracy. CEO pay jumped 535% in the 1990s, dwarfing the 297% rise in the S&P 500, 116% rise in corporate profits and 32% increase in average worker pay (not adjusted for inflation). The pay gap between CEOs and the President of the United States has grown from 2:1 to 62:1 since 1960, reports the Institute for Policy Studies and United for a Fair Economy in Executive Excess 2000.

If average pay for production workers had grown at the same rate as it has for CEOs during this boom, instead of barely outpacing inflation, their 1999 annual earnings would have been $114,035 instead of $23,753. If the minimum wage had risen as fast as CEO pay, it would now be $24.13 an hour, instead of $5.15.

Executive Excess 2000 spotlights earnings among Internet executives, many of whom are being hotly pursued for campaign contributions by both major political parties. Among the findings:

The CEOs of the Fortune e-50 Internet economy index held unrealized stock options at the end of their fiscal years with a total combined value of $11.7 billion–about five times the combined net worth of the bottom one-third of American households. Sixty-four nations have Gross Domestic Products less than $11.7 billion.

Fortune e-50 CEOs held an average $234.9 million in unrealized stock options, compared to $32.5 million for 355 CEOs from a cross-section of major firms.

Although Fortune e-50 CEOs tend to earn more than their counterparts at other leading firms, they fall far short in terms of company revenues and job creation. Only 30% of the e-50 firms made the Fortune 500 list of top revenue-earners. Some 44% have 1,000 or fewer employees, compared with only 1.6% of Fortune 500 firms.

While the CEO pay explosion disturbs most Americans, the issue is largely absent from the Presidential campaign. "Particularly with Richard Cheney on the Republican ticket, we shouldn’t be surprised that the major candidates are ignoring the problem of excessive CEO pay," says IPS Fellow Sarah Anderson. Cheney received compensation worth an estimated $38 million, including future stock options presenting a conflict of interest, when he retired recently as chairman of oil services firm Halliburton, the nation’s fifth largest military contractor.

Executive Excess 2000 examines how exorbitant pay in the private sector affects the public sector. The widening gap between public and private sector pay is of particular concern because 65% of the government’s Senior Executive Service will be eligible for retirement by the year 2004. IPS Director John Cavanagh observes, "Government recruiters face tremendous challenges in luring highly skilled people across this pay chasm."

The report also looks at the problem of public employees cashing in on their government experience in ethically questionable ways. For example, last year former Treasury Secretary Robert Rubin earned more than $21 million from Citigroup, a company that owes its existence to legislation Rubin helped push through Congress. Former SEC Chairman Richard Breeden and at least five former SEC commissioners are directors at Internet-based businesses. Former public servants can make more money by attending a few board meetings of companies than by regulating them.

"The good news is that these trends are not irreversible and there are specific steps that can be taken to rein in excessive CEO pay," says UFE Co-director Chuck Collins. The report makes recommendations for reversing the wage gap through legislation, living wage ordinances, and investor activism.

The Institute for Policy Studies is an independent center for progressive research and education in Washington, DC. United for a Fair Economy is a national organization based in Boston that provides educational resources and supports grassroots groups and legislative action to reduce economic inequality.

Download the study (PDF, 226K)