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If executive pay packages are based on their value to the company, why do they keep increasing so much faster than wages? How have CEOs continuously become more

If executive pay packages are based on their value to the company, why do they keep increasing so much faster than wages? How have CEOs continuously become more and more valuable relative to workers over the previous 50 years? "In 2020, the ratio of CEO-to-typical-worker compensation was 351-to-1 under the realized measure of CEO pay; that is up from 307-to-1 in 2019 and a big increase from 21-to-1 in 1965 and 61-to-1 in 1989."[0] [0]: https://www.epi.org/publication/ceo-pay-in-2020/ https://www.epi.org/publication/ceo-pay-in-2020/

tedunangst 5y ago
Companies are larger? If the CEO used to earn 1% of cumulative salary of all workers, and now they earn 0.5% but there's 4x as many workers, that's still a 2x increase. Why would you expect entry level workers wages to increase in proportion to company size?
Invictus0 5y ago
Apple is worth 3 trillion dollars; The stock has surged over 1,000% since Cook took charge. Is it really surprising that he took home 100 million? It pales in comparison to Musk's $250B. If he can increase the stock value just 0.01% it pays for his entire compensation package 3x over.
mucle6 5y ago
The value of oxygen is incredibly high, but the supply makes it priced low. Almost by definition, the higher the value of an executive, the lower the supply. As companies get bigger, the executives are able to add more value. If you have an executive leading the largest company,(i.e. Apple valuation wise), they have the largest ability to add value. And what is the supply for that? So far only one person, the current CEO, has experience. This creates a very limited supply where the pay matches the value created closer than in the vast majority of professions.
- allturtles 5y ago
  How did you come up with a supply of 1 person? You could find thousands of well-qualified people who would want to take Tim Cook's job.
  - mucle6 5y ago
    Don't step over dollars to chase pennies. If we were to filter people by their previous experience on running a 2.8t dollar company, or growing a company to 2.8t dollars, then Tim Cook is the only person that qualifies. Apple made 94.68 billion while paying Tim Cook 98 million. They paid him 1/1000th of their profit. If Apple knew someone else could do 10% better than him, they would very gladly replace him and could even pay his replacement ten times more. Ten percent more of 94 billion would be 9.4 billion, while the replacement would make 1 billion. I don't know if you are a software developer, but often they will look "up" at people making more than them and claim that they make too much, without looking around understanding that no company pays new grads $200k out of the kindness of their heart. The answer to why anyone makes as much as they do is simply because the market allows them to capture that much of the value they create. Emotions and comparisons are not relevant.

tedunangst 5y ago

Companies are larger? If the CEO used to earn 1% of cumulative salary of all workers, and now they earn 0.5% but there's 4x as many workers, that's still a 2x increase. Why would you expect entry level workers wages to increase in proportion to company size?

Invictus0 5y ago

Apple is worth 3 trillion dollars; The stock has surged over 1,000% since Cook took charge. Is it really surprising that he took home 100 million? It pales in comparison to Musk's $250B. If he can increase the stock value just 0.01% it pays for his entire compensation package 3x over.

mucle6 5y ago

The value of oxygen is incredibly high, but the supply makes it priced low. Almost by definition, the higher the value of an executive, the lower the supply. As companies get bigger, the executives are able to add more value. If you have an executive leading the largest company,(i.e. Apple valuation wise), they have the largest ability to add value. And what is the supply for that? So far only one person, the current CEO, has experience. This creates a very limited supply where the pay matches the value created closer than in the vast majority of professions.

allturtles 5y ago
How did you come up with a supply of 1 person? You could find thousands of well-qualified people who would want to take Tim Cook's job.
- mucle6 5y ago
  Don't step over dollars to chase pennies. If we were to filter people by their previous experience on running a 2.8t dollar company, or growing a company to 2.8t dollars, then Tim Cook is the only person that qualifies. Apple made 94.68 billion while paying Tim Cook 98 million. They paid him 1/1000th of their profit. If Apple knew someone else could do 10% better than him, they would very gladly replace him and could even pay his replacement ten times more. Ten percent more of 94 billion would be 9.4 billion, while the replacement would make 1 billion. I don't know if you are a software developer, but often they will look "up" at people making more than them and claim that they make too much, without looking around understanding that no company pays new grads $200k out of the kindness of their heart. The answer to why anyone makes as much as they do is simply because the market allows them to capture that much of the value they create. Emotions and comparisons are not relevant.