Finance News & Insights

Top CEOs earned 271 times more than their workers last year: Why it’s an issue for small firms, too

It’s no secret that CEOs and other execs significantly out-earn their rank-and-file counterparts, but it might be a bit jarring to find out just how much more the C-Suite make. And thanks to a new reg that’s slated to kick in soon, it might also cause a whole bunch of problems for smaller firms.

Chief executive officers at 350 of the largest U.S. corporations made an average of $15.6 million in 2016, according to the Economic Policy Institute’s annual report on executive compensation.

Put another way: CEOs at these firms earned 271 times more than what the average employee brought home last year.

Although the figure is alarmingly high, it’s actually down from the previous year when CEOs earned $16.3 million on average and the CEO-to-average-worker ratio was 286-to-1.

Lawrence Mishel, a report author and president of EPI, explained the decrease by stating:

“The very highest paid [CEOs] may be receiving less this year than last when you include how much they received from cashing out their stock options. But CEO pay remains extraordinarily high relative to what’s happened to stock prices, wages of other high earners or corporate profits.”

Dodd-Frank rule hanging around

This CEO-to-worker ratio is a hot topic right now thanks to a controversial provision in a generally controversial law, the Dodd-Frank Act.

That provision we’re referring to would require individual companies to calculate their CEO’s pay and compare it with the median pay of their workers — and it’s slated to take effect in 2018.

While many believed the Trump administration would kill the Dodd-Frank reg as soon as it took office, a number of pressing issues has prevented it from taking action yet. So there’s a definite possibility companies will have to disclose their ratios next year.

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