On its website, the AFL-CIO, the largest federation of labor unions in the United States, has a page called Executive Paywatch that is meant to demonstrate just how much corporate executives’ pay dwarfs the compensation of the average worker. On this page, the AFL-CIO reports that the total pay of the CEOs of America’s largest corporations was, on average, 373 times larger than the earnings of an average American worker in 2014, and 335 times larger in 2015. These are striking ratios that are meant to bolster the AFL-CIO’s message: The top executives of America’s corporations are vastly overpaid, and most American workers are woefully underpaid.
For that reason, it may come as a surprise that the AFL-CIO’s calculations grossly understate just how much money executives make. While the AFL-CIO’s calculations are for CEOs at S&P 500 companies, our analysis of data for the 500 highest-paid senior executives (not all of whom are CEOs) from the ExecuComp database, which is maintained by Standard & Poor’s, suggests that the Executive Paywatch ratios are far too low. Data on these executives’ actual take-home pay, which is published, as required by law, in companies’ annual filings with the Securities and Exchange Commission (SEC), show that in 2014, senior executives made 949 times as much money as the average worker, far higher than the AFL-CIO’s ratio of 373:1.