Friday, January 02, 2009

Out of proportion

It's always worth pointing out that it takes only a matter of hours into the new year for Canada's CEOs to make more money than the average worker makes in a year. But perhaps the most interesting part of this year's article is the sidebar as to just how much executive compensation increased in 2007:
• Average annual CEO earnings: $10,408,054
Increase over previous year: 22 per cent
Of course, the economic conditions of the time were far better than those today. But it's still striking how the percentage increase in executive pay dwarfed the rates of change in other seemingly related factors.

In 2007, GDP grew by 2.7%, wages by 4.9%, and corporate profits by 5.8%. And considering that the latter two numbers reflect both the work done by all other employees toward the same ends and the resulting corporate outcomes, it's particularly doubtful that executive pay could justifiably outpace both of these measures by as much as it did.

For the moment, it's an open question whether executive compensation will be reduced as much during the current recession as it was inflated during the earlier boom. But while the massive compensation increases would seem to offer an obvious place to start cutting back, the continued rise in income disparity leaves little reason for confidence.

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