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American Enterprise Institute Creates a Fantasy About Runaway CEO Pay

Once again, the right-wing neoconservatives at the American Enterprise Institute have created their alternative version of reality regarding runaway CEO pay levels. AEI claims that the average pay for chief executives was a mere $220,700 in 2015.

To support its nonsensical claim, AEI is presenting its fantasy version of CEO pay.

AEI’s methodology for determining CEO pay is flawed for several reasons. For starters, the category of chief executives in the survey includes elementary and secondary schools, taxi and limousine services, independent artists, writers and performers.

AEI created its distorted reality of CEO pay using data from the Occupational Employment Statistics survey by the federal Bureau of Labor Statistics. The BLS surveys workplace establishments, not entire companies. And its definition of “chief executives” includes functions performed by various senior executives, not just CEOs. All these factors suggest that the BLS survey is not a reliable indicator of CEO pay.

To compare these so-called chief executives with CEOs of the S&P 500 Index companies—the nation’s largest publicly traded corporations—is laughable. The S&P 500 Index companies represent about 80% of the value of the entire U.S. stock market.

Moreover, the BLS survey only measures hourly wages, not other forms of pay, including stock bonuses, profit-sharing payments, pensions and perquisites. The bulk of the pay for the CEOs of the S&P 500 companies consists of stock-based compensation. Base salaries represent less than 10% of the total pay of the CEOs of the large corporations.

The AFL-CIO’s Executive Paywatch presents the truth about CEO pay using published data from the nation’s largest publicly traded companies in the S&P 500. The AFL-CIO website also computes the ratio of CEO-to-worker pay based on the average pay of nonsupervisory, nonfarm workers from federal data. Next month, the AFL-CIO will release the latest numbers for out-of-control CEO pay.

You can’t fool the public, AEI.