Henry Banta asks "Why hasn't competition come to CEOs?" in the current Nieman Watchdog. He documents the usual - CEO pay is now almost 400 times that of the average worker - but also brings up some new issues.
Banta's bete noir arises from a comparison of income growth for the top 1% of the population versus everybody else. He refers to a study by Bebchuk and Grinstein that I've referred to previously that showed executive pay just about doubling from 1993 to 2003 when measured as a percent of earnings. He also refers to a study by Piketty and Saez that focused more on the comparison between the top 1% and the other 99% of the population. This latter study showed that the income of the top 1% increased by 11% in the period 2002- 2006, while the rest of us saw a growth of less than 1%. Looking at a somewhat longer time scale - 1970 to 2006 - the top 1% saw their share of salaries and wages go from 5.1% to 12%.
Banta ask why? If competitive forces were so strong in explaining a growing economy, why didn't CEO compensation grow more slowly? If CEOs were worth so much, then why were the rest of us worth so little? If CEOs in the U.S. are worth so much, why are the CEOs of Japan and Europe not worth as much?
I ask where were the boards of directors in all this? Probably enjoying their six-figure board fee plus options plus perks.
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