Midday Report: CEO Pay Rises Modestly, Still Dwarfs Workers'

×
Pity the poor CEO. His pay rose only 3.6 percent last year.

If you're of a certain age, you probably remember the 1970s song, "Momma Don't Let Your Babies Grow Up to be Cowboys." Well, if you're thinking of doing a rewrite, the next verse should be: "Let them be CEOs instead."

The total compensation for the top executive at major companies last year was $10.1 million.

According to an analysis of 300 major companies by the consulting firm Hay Group and The Wall Street Journal, that's up just 3.6 percent from the year before -– not all that much different than the 2.3 percent pay hike given to the average worker.

Larry Ellison CEO pay
Getty Images
But here's how the pay gap keeps widening: You can't spend percentages. Three percent of $50,000 is 1500; three percent of $10 million is 300,000.

That means the moderate raise given to these CEOs is about six times greater than what the average worker earns in a year. And the average CEO makes nearly 300 times more than the average worker.



But the Journal says that after decades of steady increases that were even bigger, CEO pay may be leveling off.

The average CEO gets a salary of $1.1 million, an annual bonus of $2 million and stock grants of $7 million.

Company boards are trying to tie a bigger percentage of pay to performance, meaning the CEO does well if the company's shareholders do well.

Some corporate governance experts say this aligns executive pay with investor interests –- and that's a good thing. But others worry that the rising reliance on stock awards makes it more likely the people receiving them will resort to accounting maneuvers and other short-term measures to artificially boost the value of their stock.

Some of those stock grants given out when the market slumped in 2008 and 2009 are now worth huge fortunes.

So who were the highest paid executives last year? Oracle's (ORCL) Larry Ellison was number one, with total compensation of more than $94 million. He was followed by the CEOs of CBS (CBS), Walt Disney (DIS), Nike (NKE), Viacom (VIA), eBay (EBAY), Medtronic (MDT), Exxon Mobil (XOM), DaVita HealthCare (DVA) and Starbucks (SBUX).

It's good to be a CEO.

-Produced by Drew Trachtenberg

Gallery: Highest Paid CEOs of 2012


Increase your money and finance knowledge from home

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

Introduction to Value Investing

Are you the next Warren Buffett?

View Course »

Add a Comment

*0 / 3000 Character Maximum