The issue of income disparity in America continues to escalate, particularly highlighted by the AFL-CIO’s latest annual Executive Paywatch report, which reveals a widening gap between corporate executives and their subordinates. Released on a Wednesday in early 2024, the report illustrates a disconcerting trend: the compensation for CEOs at the largest 500 public companies has surged to an astounding $18.9 million. This figure translates into a shocking ratio—CEOs earned 285 times more than the typical American worker, whose salary averages around $49,500.
This ratio signifies a marked increase from 2023, when it stood at 268 to 1. This steady increase in the disparity accentuates a growing concern among labor unions and social equity advocates, as the AFL-CIO represents a collective of 15 million workers. Moreover, the report humorously notes that the average worker in the United States would have had to begin their employment back in the year 1740 to match the earnings of a contemporary CEO in 2024.
Digging deeper into the numbers, CEO compensation has seen a considerable boost in 2024, rising by 7% from the previous year. This increment has enabled the average CEO to surpass the prior peak compensation of $18.3 million recorded in 2021, which, despite being a higher figure, exhibited a substantial pay ratio of 324 to 1 for that year. Contrarily, the typical private sector worker experienced only a modest salary increase of 3% last year, as reported by the AFL-CIO and corroborated by Bureau of Labor Statistics data.
The report does not shy away from scrutinizing the federal tax policies, particularly referencing the tax and spending cuts package signed into law by then-President Donald Trump on July 4. The AFL-CIO asserts that these reforms disproportionately favor CEOs, providing them with significantly larger tax breaks than those available to the average worker. Specifically, the average CEO is anticipated to benefit from a tax cut amounting to nearly $490,000 due to the extension of lower individual income tax rates, a legacy of Trump’s 2017 Tax Cuts and Jobs Act. In stark contrast, regular workers can expect a mere $765 benefit.
Interestingly, the structure of CEO compensation diverges from that of regular workers in significant ways. Unlike the traditional wage model that characterizes most employees’ earnings, salaries form only a minor fraction of a CEO’s total compensation package. Nearly half of the remuneration for top executives is comprised of restricted stock awards, accompanied by bonuses that often climb to around $4 million.
Turning to specific cases within the corporate realm, the report identifies Patrick Smith, the CEO of Axon Enterprise, as the highest-paid executive among S&P 500 companies, pocketing a remarkable nearly $165 million in total compensation. Additionally, the pay disparities are epitomized by Starbucks CEO Brian Niccol, whose compensation was indexed at a staggering 6,666 times greater than that of the average Starbucks worker. Niccol, who took over leadership in September of the previous year, has an annualized salary nearing $98 million, juxtaposed sharply against the worker’s pay, which is less than $15,000.
The AFL-CIO’s Executive Paywatch report presents crucial insights into the escalating income inequality in corporate America, calling attention to the systemic discrepancies between the earnings of corporate leaders and the everyday worker. As these figures are further examined, they shed light on the pressing need for policy reforms, equitable wage practices, and a deeper conversation on the socio-economic landscape affecting millions of workers in the United States. The dynamics of executive pay reflect deeper societal issues that merit discussion, calling for collective action from labor unions, policymakers, and the general populace.
