CEO pay still dwarfing pay of U.S. workers: union report

BOSTON/NEW YORK (Reuters) - A wide and longstanding gap between the earnings of U.S. CEOs and workers shows no signs of narrowing, according to a labor group analysis released on Tuesday.

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

Chief executives of S&P 500 companies surveyed were paid on average $13.1 million last year, 347 times the pay of the average U.S. worker, according to the AFL-CIO, the largest federation of U.S. labor unions.

That gap was up from 335 times worker pay in 2015, reflecting a widening income inequality, said the labor group, which posted the latest figure on its website.

The AFL-CIO used the survey release to highlight slow U.S. wage growth and the outsourcing of jobs to countries with lower wages. Corporate directors were at fault for enabling top executives’ pay, even when investor returns lag, AFL-CIO President Richard Trumka said.

“The system is rigged,” he said in an interview with CNBC. “We think shareholders ought to become more active and lower those (executive pay raises), and that workers ought to get a bigger share of the wealth they produce.”

The labor group’s annual study often draws notice as a measure of how U.S. workers are largely not sharing the economic gains of those at the top of the income scale, even as official unemployment remains low.

Dissatisfaction among those workers was one reason many backed Donald Trump in last year’s U.S. presidential election.

U.S. investors tend to support the current CEO pay levels, however. In the advisory votes that S&P 500 companies held for their shareholders on executive pay last year, they received average support of 91 percent, according to consulting firm Semler Brossy. Only six companies received less than 50 percent support in the advisory votes.

For its study the AFL-CIO analyzed available filings from 419 companies in the S&P 500 index. It found the average pay of CEOs was roughly $13.1 million in 2016, a 6 percent increase over the prior year.

In contrast, the average annual pay of production and non-supervisory workers in the United States was $37,632, a 2 percent increase, the labor group said, citing figures from the Bureau of Labor Statistics, a Department of Labor agency.

The AFL-CIO said that when adjusted for inflation, U.S worker’s wages have been stagnant for 50 years. Adjusted for inflation, production and non-supervisory workers averaged $41,473 a year in 1967, for instance.

U.S. CEO pay is often higher than in other countries because of the widespread practice of using “peer group” averages to set pay, AFL-CIO officials said in a conference call with reporters. One improvement could be to make shareholder votes on pay binding, as they are for British companies, they said.

The AFL-CIO’s measure of pay differences is imperfect because it does not compare executives directly with their own employees. A rule dating from the administration of Democratic former President Barack Obama that is slated to go into effect next year would require most publicly listed U.S. companies to disclose the ratio of their CEO pay to that of the median pay of their workforce.

Michael Piwowar, a Republican member of the U.S. Securities and Exchange Commission, said in February that the agency was seeking comments about whether to delay the rule and whether companies might face challenges with compliance, prompting calls from Trumka, pension funds and others in support of the disclosure.

Reporting by Ross Kerber in Boston and Peter Szekely in New York; Editing by Frances Kerry