Why Do CEOs Make So Much Money?

The world is bigger. So are the stock options.

In Economics in Plain English, the new economic explainer video series from The Atlantic, business editor Derek Thompson answers big and small questions selected from hundreds of reader submissions.

In 1965, the typical CEO at one of America's 500 largest companies made 20x more than his typical worker. Today, she makes more than 200x. What happened? There is a practical answer and a philosophical answer.

[Drowsong]

What I don't understand is this: If a company is doing well, can't they afford to pay their average employee well? (Then a CEO don't need to make 280x that to be paid well.)

[VIIStar]

this ones a bit of a stinker.
he didn't talk about loading the board of directors with friends to vote for pay raises for each other.

[chamboyette]

People keep complaining about CEOs being overpaid, but one profession which is really overpaid are dominatrixes. There should be a law maximizing what they can be paid. My dominatrix makes more in a three hours session than I make in a day!

[FeminismDebunked]

A CEO on $1 Million will be just an Productive as a CEO on $100 Million. Shareholders are being Ripped off.

[richardbixler]

The problem is CEO’s have learned that they can use funds that should be spent on wages, talent acquisition/retention and R&D to buy back stock. This creates an artifically low supply for stocks making their personal share more valuable despite the fact they’re often running the company into the ground. After a decade or so of doing this they sell their shares leave with a huge severance package and the companies is on life support.

[pratikjain]

Employees should buy their companies stock so that they grow with it.

[zaccoop]

This is a lie, companies don't just pay for quality management, if you have a Dubai walmart, you have a dubai regional manager, if you have a new store in India, you have a new manager, CEOs don't have a harder job, and aren't more valuable, they just delegate to another... they would just rather take the extra millions in stock than give a bonus to the employees that actually do the job, give 5000 employees a $2000 bonus instead, and you'll keep an employee happier. They'll pay bills, pay monthly rent, pay utilities, buy a new bike, instead of increasing stock prices which only are saved, and do nothing to build the economy.

[yongamer]

What about paying workers more so that they feel incentivized to work better?

[cringedproductions]

Now this was really soft, it was so soft that I almost wanted to slap Derek for being so politicly correct (it was just a reaction Derek so please don't take it personally). The problem with explaining this type of topic is the correlation to the bigger picture which Derek failed to mention; Avarice Egocentric and the implications this has on the planet and ALL forms of life. The reason CEO's make so much money is simple so lets not try to justify or rationalise it (like Derek did) as this is what seems to have become the norm these days. Capitalism promotes, entertains and sustains greed to the point that it eventually collapses and you don't need to read Marx to understand this fact. Earth today is run by plutocracy and democracy has been displaced and once reach the point that people are being ruled by a system that has zero moral values then people are going to suffer and people are suffering immeasurably today on a global scale.

On a brighter note there is change coming that will wipe the big smiles of these CEOs faces and in my honest opinion it cannot happen quick enough, there will always be CEOs in the future but I doubt they will be human.

Cheers

[yoyu]

People with no understanding of business keep thinking their entitled to more pay for an unskilled job that a highschooler could do

[burgesskj]

The numbers on this are dated: latest figures show the Bonuses ALONE for executives were more than the ENTIRE PAY of working poor Americans. 80% of U.S. to be precise. COMBINED.

[cjracer]

It's just one job.  Stop trying to push your agenda.  You said it yourself, if you took the most "unequal" pay and spread it to all employees, it would only be equal to 1900 employees.  Spread that out to all employees and you'll see that it's equal to, well, nothing.


Everyone complains about walmart.  If you distributed his pay among all employees, each worker would get a whopping $10/year.

[michaelcoulter]

My dream job is a CEO I'm 10 years of old

[logannemazerolle]

ceos should be limited to 20% more only or smt use the money for the ppl actually running the company aka imployees doing the job needed for the company to run in the first place

[shrek]

You dont need that much money! If that was me i would donate 90 percent of my salary and distribute it to the workers, we dont need much to live. Simplicity is the way to go, get rid of greed in our system.

[frankisawesomee]

Google ceo got like 280 million lol 🤣🤣

[sojujinro]

CEOs must make their investors money. if they dont, CEOs are sued by their investors.

[brandonkenney]

More importantly, why are people concerned with how much a CEO gets paid compared to other employees in a company? Employees work on a voluntary agreement, agreeing that they will use their time/skills to work in a company, and the company agrees to compensate for an agreed amount. If an employee does not like the arrangement, they can always negotiate with their employer or choose to go elsewhere for better opportunities. There are only 2 reasons I would argue that CEO's should not be making more money than they do:
1. They are engaged in Crony Capitalism, which is when they have an advantage granted to them by the government that is not equally available to anyone else (usually in the form of tax exemptions or legislation that directly benefits them and nobody else such as anti-competition laws).
2. They are in a non-profit organization. The whole purpose of a non-profit organization is to reinvest its profits into the company to further its mission/cause, which allows the company certain tax exemptions. How much anybody should be paid in such a company is up for debate, but I think most people would agree that more than half of the money made should go back to the company, and not as payment towards employees/CEO's.

[georgechristiansen]

What a bunch of ignorant people in these comments!

Do the math: Divide the entire salary of the CEO and you get LESS than a dollar per WEEK raise per employee.

Paying a CEO more has practically nothing to do with the pay of employees....and if it is so easy DO IT YOURSELF.

[phillipleconte]

"thin as piss on a rock" LBJ