There's No Good Reason for Your Boss to Make 347 Times What You Do
Date Written: 07/07/2017
Year Published: 2017
Resource Type: Article
Cx Number: CX21115
CEO pay at America's 500 largest companies averaged $13.1 million in 2016. That's 347 times what the average employee makes.
So CEOs make a lot of money. But, some say, so do athletes and movie stars. Why pick on corporate bosses, then?
First, because the market sets compensation for athletes and movie stars, but not for CEOs. Teams and movie studios bid for athletes and movie stars. CEO pay is set by a rigged system that has nothing to do with supply and demand.
NBA teams bid for LeBron James because his skills are portable: He'd be a superstar on any team. CEOs' skills are much more closely tied to their knowledge of a single company -- its finances, products, personnel, culture, competitors, etc. Such knowledge and skills are best gained working within the company, and not worth much outside.
In fact, a CEO jumping between large companies happens less than once a year. And when they jump, they usually fail.