Reuters/Robert Galbraith
Oracle CEO Larry Ellison celebrates a yacht racing win.
Average CEO pay in the United States' biggest companies has been increasing at a moderate rate over the past few years, rising to $11.4 million in 2013, according to a new Wall Street Journal report .
Their pay rose 5.5% over 2012, while wages and salaries for private sector workers rose 1.8% over the same period.
According to the Associated Press and Equilar, the median pay package of CEOs of S&P 500 companies was 257 times more than the salary of their average employee, up from 181 times more in 2009.
To many Americans, this appears to be a travesty and a symptom of dangerous inequality.
But even though a top CEO's annual pay package may still be an unfathomable amount of money for most people, defenders of this recent increase in pay think anger toward it is misguided. They say that it is largely the result of a healthy stock market and also point to the fact that a large majority of shareholders, those who want to avoid losing money on poorly performing executives, approve of how much their companies' CEOs are making.
"As the public cried for executives' pay to be tied to performance, that trend has very much happened," says Kevin Scott, co-founder/CEO of branding consulting firm the ADDO Institute. "And now, as their stocks are performing at very high levels, those CEOs are reaping the benefits."
During the recession, critics were upset that executives could enjoy big salaries and bonuses as their companies performed terribly in the stock market.
When the Dodd-Frank Act passed in 2010, its Wall Street reforms included a "say on pay" provision that gave shareholders the right to vote on an executive's pay package every three years.
Companies' boards have responded to this regulation, and there has been a trend toward basing CEO compensation on how well a company is doing in the market relative to its competition. "They've learned to avoid investor pay irritants and red flags, such as compensation that is not linked to performance and pay perks to cover taxes executives owed," the Wall Street Journal reported in April.
U.S. stocks are at all-time highs, and so it follows that many CEOs of the nation's biggest corporations are making more money than they were a few years ago.
Furthermore, inequality is down from the boom years of the late 90s, where the average pay of an S&P 500 CEO hit a high of 350 times that of the median household income, according to the University of Chicago's Booth School of Business.
Chicago Booth professor Steven Neil Kaplan has written extensively on executive pay, and agrees that inequality is a real concern. He believes, however, that although there are of course exceptions, CEOs' pay packages are not the result of greed and excess, and argues that CEO pay should be compared with the salaries of other high-earning professionals: "If you look at CEO pay compared to the average pay of people in the top 0.1%, it's about where it was 20 years ago — in line with [that of] lawyers and private-company executives, and less than hedge-fund managers," he said last year.