Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. Print
September 03, 2007 01:00 AM

Study charges U.S. CEOs are paid too much

Barry B. Burr
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    WASHINGTON — U.S. CEOs, along with private equity and hedge fund managers, should face steep income tax increases to help bring their compensation levels in line with European norms, according to a new study.

    The 20 highest-paid U.S. corporate CEOs each made an average $36.4 million in 2006 in salary, bonus, and stock and other options, nearly three times the $12.4 million their European counterparts each made on average, but much less than the average $657.5 million each of the 20 highest-paid private equity or hedge fund managers made last year.

    “The private equity boom has pushed the pay ceiling for American business leaders considerably further into the stratosphere,” according to the study by the Washington-based Institute for Policy Studies, a public policy research center, and United for a Fair Economy, a Boston-based social advocacy group, which collected pay data from various media and research sources.

    The CEOs of 386 of the largest U.S. companies each earned an average $10.8 million in 2006, more than 364 times the pay of the average American worker, while the top 20 private equity or hedge fund mangers made 22,255 times the pay of the average U.S. worker, the study said.

    “But modern economics, in reality, do not require excessive business executive pay to function,” the study said. “If it did, then the business executives that American executives compete against in the global marketplace would be just as excessively compensated as American executives. They aren’t.”

    The “vast rewards” that go to U.S. CEOs are “not an inevitable unfolding of marketplace dynamics, but a marketplace failure. Markets that fail need to be corrected,” according to the study. It suggested, among other proposals, reducing the “unconscionably wide” pay imbalance by:

    • increasing the top marginal tax rate on high incomes to between 50% and 91%, a level of that existed from the 1950s to the early1980s;

    • denying government procurement contracts or economic development subsidies or tax breaks to companies “that pay their top executives over 25, 50, or even 100 times what their lowest-paid workers receive”;

    • capping tax-deferred executive pay at $1 million;

    • eliminating tax subsidies for excessive CEO pay as a business expense, or capping the tax deduction to 25 times the pay of the company’s lowest-paid worker; and

    • increasing taxes on private equity and hedge fund executives to the 35% rate for ordinary income, instead of the 15% capital-gains rate they now pay on a substantial part of their earnings.

    Corporate focus

    Although the study suggested applying at least some of the tax proposals to reducing high private equity and hedge fund pay, its focus was on compensation for CEOs of U.S. corporations.

    The study underscored another imbalance, regarding pensions. CEOs of Standard & Poor’s 500 companies each retire with an average $10.1 million in a supplemental executive retirement plan, the study said. But “in 2004, only 36.3% of American households headed by an individual 65 or older held any type of retirement account,” and those “that did exist, on a per-household basis, averaged only $173.552 in value, a miniscule 1.7%” of the value of the average CEO’s SERP account.

    The study also found that, on average, the 20 highest-paid leaders of U.S. non-profit organizations each made $965,698; of the federal executive branch, including the president, $198,369; of the U.S. military, $178.542; and of the U.S. Congress, $171,720.

    “Every market, of course, sports a ‘going rate,’” the study said. “Try to collect significantly above that ‘going rate,’ if your skill be computer programming or selling real estate, and you’ll likely get nowhere quick. But the market for leadership doesn’t seem to work that way.” U.S. CEOs “are capturing far more compensation for their labors than individual leaders in other fields who appear to hold the same exact leadership skill set.”

    The pay gap has widened. In 1980, the average U.S. CEO pay was 40 times that of the average American worker.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Quest for Quality Amid Market Turmoil
    Sponsored Content: Quest for Quality Amid Market Turmoil

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Middle market credit: We’re gonna need a bigger boat
    Alternative Credit: Differences and Opportunities in CLOs and Credit Risk Shari…
    Fixed Income is Attractive, but Beware of "Fake" Yield
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income