WASHINGTON (Sept. 6, 4:40 p.m. ET) — Though most experts agree that executive compensation is tied more closely to performance than it was 10 years ago, the question of whether the overall pay level is still simply too high remains a hot topic of discussion.
The gap between CEO pay and that of the average worker has shrunk since 2000, but is still well more than 200-to-1, or 10 times higher than in 1965, according to “The State of Working America.” The annual report is scheduled to be released Sept. 11 by the Economic Policy Institute, a nonprofit think tank in Washington.
The EPI analysis of CEO pay found that:
* From 1978 to 2011, CEO compensation increased 725 percent, compared with an increase in compensation for workers of only 5.7 percent.
* CEOs, said the report, were paid on average 231 times more than workers in 2011, based on a calculation that includes the value of stock options exercised by CEOs. That ratio is similar — 209-to-1 — when CEO compensation is calculated based on the value of stock options granted in a year.
The report said the compensation gap — using the value of stock options granted — has shrunk nearly in half since 2000, when it peaked at 411-to-1. But the report also notes that the gap is still dramatically higher than in 1965 when it was just 18-to-1.
Calculating CEO compensation using the value of stock options exercised sends the pay gap skyrocketing, from 20-to-1 in 1965 to 383-to-1 in 2000 before dwindling to its 2011 level of 231-to-1, the report said.
Or, calculated another way, the average worker would have to work 3,489 years to earn the salary of a top-paid CEO, according to the 12th annual “The State of Working America” report.
The EPI estimate of the CEO-to-worker pay gap is still substantially smaller than the estimate by the AFL-CIO of that gap between CEO pay and the average blue-collar worker.
Using data from 313 companies provided by Salary.com, the AFL-CIO Executive Paywatch calculated that the CEO of an S&P 500 company made, on average, 380 times the average wage of a U.S. blue-collar worker in 2011.
The average CEO pay in 1980 was only 42 times higher than the pay of an average blue-collar worker, according to the AFL-CIO.
A legislatively mandated rule from the Securities and Exchange Commission that would create a formula for comparing CEO pay and median employee compensation has been pushed back until at least 2013; it was originally scheduled to be completed this year.