Efforts to Regulate CEO Pay Gain Traction

October 25, 2014 | | Boston Globe |

The soaring pay of corporate chief executives is spurring efforts to pass laws to limit their compensation and close the widening gap in earnings between workers and top executives.

Such laws have been proposed in at least three states, including Massachusetts, as well as in Switzerland. Proponents have yet to succeed in enacting these measures, but they vow to keep pressing the issue. [...]

In the United States, compensation for chief executives soared 937 percent between 1978 and 2013, while the average worker’s compensation climbed just 10 percent, according to the Economic Policy Institute. CEOs at the top 350 firms made an average of $15.2 million in compensation last year – nearly 296 times higher than the average worker’s earnings of about $52,000.

In 1978, the ratio of CEO to average worker pay was 30:1. In the 1980s, the late management consultant Peter Drucker recommended a ratio of 20:1 to prevent low worker morale.

The gap varies between industries and companies. Average CEO compensation at Starbucks, McDonald’s and other major fast-food companies was $23.8 million last year, more than 1,000 times what the average worker made, according to Demos, a New York public policy group. More than half of fast-food workers’ families nationwide rely on public assistance, according a study by the University of California and the University of Illinois.