Shocker: CEOs Make a Lot of Money!

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A sprawling special report in the Washington Post over the weekend revealed an incredible bombshell: CEOs make a lot of money. This is very surprising, because corporate executives have always appeared very poor, as some can't even afford private jets. Others have to settle for Mercedes E-Class sedans. Thank goodness economists have finally brought this startling truth to light.

Here's Peter Whoriskey providing some details about this incredible revelation:

The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories.

Wait -- just 60 percent? Actually, I find it a little surprising that the portion isn't higher. Who does the other 40 percent consist of, if not high-ranking executives making gobs of cash? Not many doctors or lawyers make more than $1.7 million per year. That sort of money is generally thought to be the result of owning a company, working on Wall Street, or being very high on the totem pole of a public company.

If anything, this evidence suggests that corporate executives make up a smaller portion of this very high group of earners than I would have thought. And that's somewhat disturbing, as I'd prefer someone commanding a firm that adds jobs and growth to the U.S. economy to be duly rewarded over someone who excels at litigation, throwing a ball through a hoop, or reciting lines before a video camera.

But the article gets stranger before it gets more sensible. As a case study, it relies on Dean Foods. The article chastises its top exec Gregg L. Engles for his $10 million salary, including a picture of his $6 million home as proof of his excess. It goes on to compare this to the measly hourly wage of $23 per hour earned by the workers who process, pasteurize, and package the company's milk. That might not sound like much in those terms, but a little quick math reveals that this equates to about $47,840 per year. While that money won't get you very far in San Francisco or Manhattan, in Dallas, Texas* -- where Dean Foods is located -- it's a pretty decent living.

This demonstrates a problem common to the inequality meme. If inequality demonstrates a situation where more people cannot afford to get by on their salaries, then it is a serious problem. While that might be the case in some situations, it isn't shown to be here. Should those who work at a company care if their CEO makes 200x what they do, if they can afford a modest home and pleasant quality of life? Perhaps, but the anger of those living relatively comfortably as someone else "greedily" earns a higher salary stems from the precise criticism they levy.

Inequality is a problem if it causes those at the lower end of the spectrum to struggle to live comfortably. While that may be the case in some situations, that evidence isn't provided in this article.

Read the full story at the Washington Post.


*Note: I originally said it was in El Paso, which I misread from their website, but the point still holds. The Dallas area has a relatively low cost of living compared to the national average.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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