Study Shows CEO Pay Up 535% in 1990s

August 31, 2000 (PLANSPONSOR.com) - Compensation for Chief Executive Officers soared 535% during the 1990s, without adjusting for inflation, according to a new study. During the same period average worker pay increased just 32%, while inflation rose 27%.

The group’s seventh annual report found that if pay levels for workers increased at the same rate as CEOs’, the annual pay would average $114,035 a year, rather than its current $23,753.

If the minimum wage had risen as fast, it would now stand at $24.13/hour, rather than the current $5.15.

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The “Executive Excess 2000” study conducted by the Institute for Policy Studies and United for a Fair Economy also noted that the S&P 500 rose 297% during the period.

Different Options

It found the top executives of 50 top Internet companies surveyed by Fortune magazine held on average $234.9 million in unrealized options at the end of their fiscal years, compared to $32.5 million for 355 CEOs representing a cross-section of leading U.S. firms.

The total combined value of the Fortune e-50s’ unrealized options was $11.7 billion – about five times the worth of the bottom one-third of U.S. households. Sixty-four nations have Gross Domestic Products less than that.

The study also notes that since 1960, the ratio between average CEOs’ pay and that of the American president has jumped from 2 to 1 to 62 to 1.

STOCKING UP? – New Bill Would Expand Stock Option Access, Benefits

July 31, 2000 (PLANSPONSOR.com) - A new bill introduced in the House of Representatives would allow the use of pre-tax employee contributions to buy company stock options, while providing a deduction for the employer when the option was exercised.

The bill (HR 4972) was just introduced by House Ways and Means Committee member Amo Houghton (R-NY) in an attempt to encourage a broader participation in employee stock option plans.

The proposal would allow employees to contribute up to $10,000 a year to a stock option plan, deferring tax until the stock is sold. The contribution basis would be taxed at ordinary income rates, excess gain as a capital gain, according to BNA’s Pension and Benefits Daily.

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The employer would receive a deduction for the value of the stock when the option is exercised.

“The deferral aspect would provide a powerful incentive to the employee to hold the stock for a longer term,” Houghton said in an introductory statement. “Importantly, the employee pays for the stock, through payroll deductions, with pre-tax dollars – not unlike a section 401(k) plan.”

The legislation would apply to stock options granted after the date of enactment.

– Nevin Adams editors@plansponsor.com

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