CEOs of big companies get richer. CEOs of less-big companies don't even keep up with inflation. - Time blog

May 29, 2008 10:06

The new income gap

The Corporate Library released early results of its annual CEO pay survey this morning. The takeaway: CEOs of big companies get richer. CEOs of less-big companies don't even keep up with inflation.

Consider:

    For the 380 CEOs who were in post for the whole of 2006 and 2007, the median increase in total actual compensation has fallen to 5.15 percent. The most significant element of slowdown can be seen to be annual and cash bonuses—the two amounts represented by bonus and non-equity incentive compensation. More than half of CEOs received a lower bonus in 2007 than they did in 2006, while non-equity incentive compensation (NEIC) showed no change at the median, demonstrating that as many CEOs saw an increase as saw a fall. Nevertheless, total annual compensation did increase by 4.8 percent at the median, driven largely by increases in base salary.

That's for the whole sample, which includes data from U.S. companies that filed proxy statements in the first quarter of 2008 and that have the same CEO as last year. The increase of 4.8%, which brings median total annual compensation to $1,306,571, is less than half the 2006 increase.

Now consider:

    For CEOs in the S&P 500 the situation was different. The 97 S&P 500 CEOs in our sample who had been in post for a two full years saw a median rise of almost 16 percent in total actual compensation. While this latter figure is lower than survey findings in 2007, it is still substantial. While these CEOs did see an increase in their bonus at the median, the decreases were more dramatic—as demonstrated by the average change which was negative 15.33 percent. NEIC rose by a slightly higher median of 5.67 percent. While increases in total annual compensation were similar in the S&P 500 to those in the larger group, the higher profits from stock options and higher value gained from vested stock awards has pushed the median total actual compensation for S&P 500 CEOs well above that of their counterparts.

If you take the whole sample and strip out compensation for those CEOs running S&P 500 firms, the median increase in total actual compensation is 2%. That's almost like a regular-person raise.

Okay, so the other thing is, I'm going to start signing my posts so when people get them on RSS feeds they know they're from me and not Justin. You might think there would be a technology solution to this. Alas.

Barbara!

About the Authors

Justin Fox: I'm the business and economics columnist for TIME. Before joining the magazine in January 2007, I spent more than a decade writing and editing for Fortune, which is in the same building (but, crucially, on a different elevator bank). I was Fortune's chief economics writer, but also covered topics ranging from international business to technology to investing to high-end Japanese cuisine. In 2000 and 2001, I was the magazine's Europe editor, based in London. I started this blog, the Curious Capitalist, on CNNMoney.com (Fortune's Internet home) in 2006.

Way back when, I also worked at the American Banker, the Birmingham News, and the (Tulare, Calif.) Advance-Register. I grew up outside San Francisco, went to college at Princeton, and lived in the Netherlands for a while. I'm married and have a son, and we live in New York.

Oh, and I'm working on a book. Have been for years. Its tentatively titled The Myth of the Rational Investor, and HarperBusiness signed me up to write it on the basis of this article in Fortune. It's almost done, I swear.

E-mail me at capitalist@timemagazine.com


Barbara Kiviat just celebrated her 5-year anniversary covering business and economics for TIME magazine. Over the years, she's written stories about Ben Bernanke, Starbucks, Atlantic City, the zany worlds of real estate, private equity and hedge funds, ING Direct, J. Crew, the people who are buying up our public roads, how Verizon really got her angry by asking for her Social Security number, and why you shouldn't go shopping when you're sad. It's a pretty good gig.

Before this, she worked at Mutual Funds magazine, where she got to know everything she possibly could about 529 college savings plans. She also used to work at The Arizona Republic newspaper in Phoenix. Her most indelible memory from that experience is standing in an asphalt parking lot on a 113-degree day accosting Honeywell employees about losing their jobs. She now very happily lives in Manhattan. Barbara grew up in Salisbury, on Maryland's Eastern Shore, so even though she's a vegetarian, she knows a whole lot about growing chickens.


About The Curious Capitalist
Justin Fox

Justin Fox is TIME's business and economics columnist. This is his blog

Barbara Kiviat

Barbara Kiviat just celebrated her 5-year anniversary covering business and economics for TIME magazine.  About the Authors