Wednesday, September 17, 2014

Robert Reich Makes 100 Times What Adjunct Professors Make While Spreading Highly Misleading Numbers About CEO Pay Compared to Ordinary Workers: Average CEO Pay Is Only $178,400



Robert Reich has an op-ed in the Chicago Sun-Times blaming Harvard Business School for inequality:
No institution is more responsible for educating the CEOs of American corporations than Harvard Business School — inculcating in them a set of ideas and principles that have resulted in a pay gap between CEOs and ordinary workers that’s gone from 20-to-1 50 years ago to almost 300-to-1 today.
Economist Mark Perry explains how wrong Robert Reich is:
In 2013, the BLS reports that the average pay for America’s 248,760 chief executives was only $178,400. The CEOs of the 200-350 S&P500 firms reported recently represent only one out of about every 1,000 firms in the country (or 1/10 of 1%) that have a CEO at the head. The larger sample of almost a quarter-million CEOs reported by the BLS gives us a much better understanding of “average CEO compensation.”

For the larger sample of CEOs reported by the BLS, their average pay of $178,400 last year was an increase of only 0.88% from the average CEO pay of $176,840 in 2012. In contrast, the BLS reports that the average pay of all workers increased by 1.42% last year to $46,440 from $45,790 in 2012. That’s right, the average worker last year saw an increase in their pay that was more than 60% greater than the increase in pay for the average US CEO. And the “CEO-to-worker pay ratio” for the average CEO compared to the average worker is only about 5X, nowhere close to the pay ratio of 331X reported by the AFL-CIO using the 350 highest-paid CEOs in the country.

Bottom Line: Discussions about “excessive CEO pay” and comparisons to average worker pay are distorted by looking at only an outlier group of the 200-350 CEOs of America’s largest companies, out of a total of almost 250,000 chief executives nationwide. Of course, many younger, risk-taking CEOs are running early stage startups and tech companies, and probably make even less than the average CEO reported by the BLS, as Scott Drum pointed out to me last month in an email. Further, he commented that “The startup CEOs are usually not in it for the salary in the early years. They’re in it for the big payoff in the long run if things go exceptionally well. If we reduce or limit the size of the Big Payoff, don’t we reduce the number of people trying to get there?”
Just a reminder: Robert Reich works at America's most partisan organization, University of California, where employees were the number one political donors to Barack Obama in 2012. Speaking of "inequality", why does Robert Reich have to win so much compared to the typical professor teaching in America , today? How many professors make that much money while only teaching one class? Should Robert Reich talk about inequality when he makes $242,613 for teaching one class? According to PBS, Robert Reich makes around 100 times the average salary of what an adjunct professor makes based on teaching one class. Does Robert Reich talk so much about CEO pay to distract taxpayers from his large and "unfair" salary compared to hard working adjunct professors?