Silver as an investment

The Myth of CEO Pay and “Greed”

mises.org / Matt Palumbo / JUNE 6, 2015

A comparison between CEOs and the average worker seems like a perfect manifestation of the old cliché, “the rich get richer and the poor get poorer.” During the recent financial crisis, stories were commonplace of CEOs paying themselves millions as they drove their firms into the ground. Not only that, we constantly read that CEOs are out-earning the average worker by a sickening amount — and that this gap is on the rise. And of course those reporting on these alleged trends do so to further a specific agenda: shameless greed and salary disparity.

One of the most common charges leveled against CEOs is that they out-earn the average worker 300:1. I’ve even seen a variation of this claiming a ratio of 500:1, but the more common figure cited is from the AFL-CIO, which claims a ratio of 331:1. Nowhere in the AFL-CIOs report is the disclosure that the CEOs in question are CEOs “of an S&P 500 Index company.” So, in fact, the sample is only of 500 CEOs, and those at some of the nation’s largest companies, while there are nearly 250,000 CEOs in the United States representing firms of varying size.

But read any news outlet and you get the same story. Look at Al Jazeera’s reporting, “In 2013 the average American CEO was paid 331 times what the average worker in the United States earned and 774 times what full-time minimum wage workers made, according to a new analysis released Tuesday by the AFL-CIO, the nation’s largest labor union.” The fact that this only reflects the pay of 500 CEOs not millions of Americans is clearly glossed over, as they even claim that this is representative of the “average CEO.”

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