CEO Pay Raise 8.3%, How About You?

Did you get an 8.3% pay raise last year? Probably not, but that’s what the typical large public company CEO received. Their average pay is now $11.7 million, up from $10.8 million the prior year. That’s roughly 260 X the average US worker’s roughly $45,000 annually.

There are a number of reasons for this pay level and these raises. First, it’s an undeniably tough job, typically 80 to 120 hours a week. The complexity and ambiguity is almost unfathomable, as is the responsibility for all employees’ safety and security, and customer and investor satisfaction.

Job security is notoriously lacking. Well known and often strongly performing CEOs can be quickly thrown out of a job: Mark Fields at Ford, Jeff Immelt at GE, Jeff Fettig at Whirlpool, Peter Hancock at AIG and Travis Kalanick at Uber to name a few. The reasons vary from ethical lapses to business performance, more active activist investors, new technologies and rivals, and increasing investor focus on the short term.

There is also the supply and demand issue. Few people have the skill set and experience to be an effective CEO. (See the CEO Test https://www.linkedin.com/pulse/take-ceo-test-john-decker and “CEO Mastering the Corporate Pyramid” https://www.amazon.com/CEO-Mastering-Corporate-John-Decker/dp/1440840164/ref=sr_1_1?ie=UTF8&qid=1500564493&sr=8-1&keywords=ceo+john+decker for some insight here.)

On the other hand, pay increases for US workers averaged 2.5% in 2016. You might expect it to be higher given the increase in employment (222,000 new jobs in June) and the 4.4% unemployment rate. But a number of factors are reducing wage growth. The economy and job market are continuing a long term trend toward a global workforce. Automation continues to grow, particularly in manufacturing but increasingly in the service sector. Inflation is relatively low, and wage increases are tied somewhat to inflation. Job skill requirements are rapidly changing with employees and schools having some difficulty keeping up.

At the same time, employers have increasingly easy access to qualified candidates through the internet. They can do “just in time” hiring, have reduced training budgets as a result, and take advantage of the “gig” economy–temporary assignments with no benefits.

What can you do to get your raise? Take charge of your own career, set professional goals, write them down and execute them in a disciplined way. Watch the job market and identify growing skill demands. Devote five to ten percent of your time on training (no one else will do it for you). And, find a mentor and/or professional career help if you need it.

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