The Building Tradesman Newspaper

Friday, August 23, 2019

News Briefs

By The Building Tradesman

CEO wages grew by 940% since '78

Don't worry, the nation's CEOs are doing fine.

The income of chief executive officers (CEOs) of the top-300  firms in the U.S. has grown 52.6 percent in the economic recovery since 2009 using the "stock options-realized" measure and 29.4 percent using the "stock options-granted" measure. In contrast, the typical workers in these large firms saw their annual compensation grow by just 5.3 percent during that time.

"Corporate boards running America’s largest public firms are giving top executives outsize compensation packages," said the Economic Policy Institute in an Aug. 14 report. "Average pay of CEOs at the top 350 firms in 2018 was $17.2 million - or $14.0 million using a more conservative measure." (Stock options make up a big part of CEO pay packages, and the conservative measure values the options when "granted," versus when cashed in, or “realized.”)

It's part of a decades-long trend. In 1965, CEO-to-typical-worker compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989. Today it is 278-to-1.

From 1978 to 2018, CEO compensation grew by 940 percent, far outstripping the S&P stock market growth (+706.7 percent) and the wage growth of very high earners (+339.2 percent). In contrast, real wages for the typical worker grew by just 11.9 percent.

More grim news from pension report

The Pension Benefit Guaranty Corporation (PBGC), the woefully under-funded government agency that administers the financial "backstop" of single- and multi-employer pension plans, released its latest Projections Report on Aug. 6.

The PBGC "remains in dire condition," says NECA, the National Electrical Contractors Association.  "The PBGC reported that absent a stark change in law or extreme increase in premiums, they are projected to run out of money by the end of fiscal year 2025."

The PBGC currently provides assistance to 1.5 million people in failed plans. It is funded through employer premiums and investment returns.

Compared to other multiemployer plans like the moribund Teamsters Central States plan, most building trades pension plans are reasonably healthy. 

"About 125 of the 1,400 multiemployer plans that PBGC insures are in critical and declining status and have declared that they will be unable to raise contributions sufficiently to avoid insolvency over the next 20 years," the PBGC report said. The current multiemployer system, covering approximately 10.6 million participants in about 1,400 plans, "remains under severe stress," the PBGC report says.

On July 24 the Democrat-led U.S. House adopted the Butch Lewis Act, which would establish a new division in the federal government to monitor and issue low-rate bonds and loan the proceeds to pensions. Critics have said the bill, and its outlay of $64 billion over 10 years, amounts to a "bailout" of the pension system, while proponents see it as a step in the right direction.