Fact Checker: Clinton on CEO pay

Introduction

'When you see that you've got CEOs making 300 times what the average worker's making, you know the deck is stacked in favor of those at the top.”

Source of claim: Hillary Clinton campaign ad entitled 'Reshuffle” now airing in Iowa.

Analysis

In the campaign ad, Clinton targets the growing wage gap in the nation, referring to the gap between the highest income earners and the average U.S. worker.

The Clinton campaign says the statistic on chief executive officer pay comes from a Fortune article in June that references a study from the Economic Policy Institute, a liberal-leaning economic think tank. That study found CEOs at the top 350 U.S. firms earned an average of $16.3 million a year in salary, stock options and other compensation in 2014. According to the study, those CEOs earn 303.4 times more than the average full-time worker at their firms.

That gap has risen dramatically in recent years, according to the report. Since the recession in 2009, average CEO salaries have risen 54.3 percent while pay for average workers was unchanged.

In 1978, CEOs earned 30 times more than the average worker, when adjusted for inflation. Over the time period since then, CEO salaries have risen 997 percent while average worker salaries are up less than 11 percent.

The 2014 ratio is actually down from its peak in 2000, when CEOs earned 376 times what the average worker made.

The EPI report notes that the pay increase for CEOs has outpaced the increase in earnings of the top 0.1 percent of all workers. The authors argue that indicates the large increases are not driven by performances of CEOs but rather by their ability to extract concessions from companies. The authors argue that means paying CEOs less or taxing them more would not have an adverse impact on output or employment.

Critics say it is unfair to only compare the pay of just the largest U.S. companies, leaving out salaries for CEOs at smaller firms. The Bureau of Labor Statistics estimates there are 246,240 CEO-level workers in the country, earning an average salary of $180,700. The BLS data lists average pay for full-time workers in the United States at $801 per week, or $41,652 a year. That's a ratio of 4.3 to 1, much smaller than the 303-to-1 ratio in the EPI report. But that CEO salary data does not account for other compensation, such as stock options, which can drastically increase salaries.

Mark Perry, an economics professor at the University of Michigan and Michael Saltsman, research director at the Employment Policies Institute, wrote an opinion column for the Wall Street Journal in 2014 arguing cutting pay for the highest earning CEOs would have a minimal impact. It noted the executive compensation package for Yum Brands, which manages several fast food chains, totaled $30.7 million. If all of that money was distributed across the company's 463,000 part-time employees, hourly pay rates would go up just 5-cents.

Conclusion

Clinton is cherry picking the statistic to best support her argument and not one that necessarily reflects the pay of all CEOs. But the context of the ad is focused on the top 1 percent compared with the middle class, which fits the statistic used. Clinton is dangerously close to a lower grade but ultimately the context keeps this claim as an ‘A'.