It’s no secret that CEOs in the US are well paid. In some cases, CEOs are extremely well paid compared to the average American worker. The average CEO salary was $9.7 million in 2012, according to independent online news service Alternet. That’s more than 200 times the average American’s annual salary of $40,196, as reported by the U.S. Bureau of Labor Statistics.
Compensation Is More Than Salary
Income inequality is a hot button for many people, especially in light of the economic problems the U.S. has experienced since the 2008 recession began. Remember, however, that a CEO may earn in other ways than just salary -- high-dollar retirement options, bonus and stock in the company can add significantly to a weekly paycheck. J.C. Penney’s former CEO Ron Johnson, for example, owned about $80 million worth of shares in his previous job at Apple. Johnson’s compensation package for the 18 months he worked at Penney was reported as $53.3 million in the company’s 2012 proxy report, according to Bloomberg.com.
Under terms of the Dodd-Frank law, public companies must report CEO compensation in relation to wages of rank-and-file workers, according to Bloomberg.com. The Securities and Exchange Commission, however, hasn't yet completed the rules to implement the law. What data is available, according to Bloomberg, indicates the average CEO's total compensation is about 204 times as much as the average worker's -- an increase of 20 percent since 2009. In some companies, according to Bloomberg, the ratio is even higher for 2011 to 2012 pay: 339 at AT&T, 351 at McDonald’s Corp. and 491 at General Electric. For comparison, the ratio in the 1950s is estimated to have been 20-to-1.
CEO salaries vary according to the industry. Alternet notes that CEOs of utilities had the lowest pay, at an average of $7.5 million in 2011. CEOs who worked in health care and the media industry earned the most. Although CEOs, in common with employees in general, received less pay initially after the financial crisis hit in 2008, salaries rebounded, and 60 percent of CEOs got a raise in 2011, according to Alternet. But the pay gap between CEOs and workers has widened. In 2012, Alternet reports the average CEO earned 354 times more than people on the front lines. The increase for CEOs is partly due to the soaring stock market, as stock values often drive total CEO compensation.
Examples of CEO Pay
CEO pay can be radically different from one organization or industry to the next, according to “Forbes” magazine. Richard K. Templeton, CEO of Texas instruments in 2012, earned $15.36 million and owned $37 million in stock. David M. Cote, CEO of Honeywell -- another technology company -- had a salary of $55.7 million and stock valued at $21.5 million. In health care, John C. Lechleiter of Eli Lilly and Company earned $15.57 million, compared to $51.5 million earned by CEO George Paz of Express Scripts. McKesson, however, paid John H. Hammergreen $131.9 million in 2012, according to “Forbes.”
Beth Greenwood is an RN and has been a writer since 2010. She specializes in medical and health topics, as well as career articles about health care professions. Greenwood holds an Associate of Science in nursing from Shasta College.