Unlike many Americans whose salaries aren't keeping up with inflation, chief executives are seeing their compensation packages rise by 13 percent annually, one study says.
Critics argue the system for setting CEO pay is flawed and is not based enough on performance. They worry that giving CEOs large percentage increases year after year causes resentment among many workers who have endured earning lower wages, paying more for health care, watching their pensions reduced or seeing jobs sent overseas during a slumping economy.
"We believe all employees should be paid fairly and that includes workers and the CEO," said Brandon Rees, a research analyst with the AFL-CIO, a national association of labor unions. "The trend has been that CEOs take a disproportionate share of compensation."
In 2004, the average chief executive earned $10 million in total compensation, a 13 percent increase over 2003, according a survey by consulting firm Pearl Meyer & Partners for The New York Times.
The average American worker in a nonsupervisory job earned about $27,485 in 2004 - 2.2 percent higher than the year before, according to the AFL-CIO.
Many experts insist that comparing an executive's job with front-line workers is unfair, since the expectations are different. They add that many of the increases in compensation are tied directly to a company's performance in a given year.
That's the case with A.L. "Tom" Giannopoulos, head of information systems company Micros Systems Inc., whose total compensation grew 69 percent, to $3.5 million, in 2004 from $2.08 million in 2003. The increase reflected an 80 percent growth in the value of the company's stock during 2004, said Louise Casamento, a company spokeswoman.
Excluding stock options and other perks, Giannopoulos' annual salary grew 19 percent to $820,000 in 2004 compared with average workers whose salaries increased by 5.5 percent to 6 percent each year, she said.
There is a "privileged class" of chief executives who do extraordinary work, said Chuck Pappalardo, managing director, of executive search firm Trilogy Venture Search based in Burlingame, Calif.
"Not everyone is capable of running a truly global company," he said. "Companies pay them for literally giving over their entire lives to the company. ... Yes, they make a lot of money, but you have to compare what it takes to do it."
The problem many critics have with high executive pay is the lack of a direct connection between pay and performance.
"It wouldn't be so bad, if you could prove that the ones who made the most money performed the best," said Graef Crystal, a columnist for Bloomberg News and a former compensation consultant and business professor. "If CEOs are being paid that much, they are taking it from somewhere - shareholders, employees, consumers."
Part of the problem, experts say, is the way executive compensation packages are determined.
At public companies, the board has a compensation committee, which often is composed of peer executives from other corporations. Those committees hire compensation consultants who study what similar companies pay their executives. The committee members and the consultant have an incentive to see compensation increase, experts say.
"What goes around comes around and somebody in turn is going to take care of them," said David Theobald, chief executive of Netshare, a Novato, Calif.-based Web site for people who earn more than $100,000 a year. "It's a vicious circle. ... The consultant is always going to put his best foot forward and more often than not, he's going to make it seem like it's justified. It's absolutely absurd."