Wouldn't it be interesting to see how a CEOs pay measures up to an average workers'? Well, a report put out by the Economic Policy Institute does just that! The 2005 study found that the CEO of a company making at least $1 billion in annual revenues made $10,982,000, compared to the average workers' $41,861. Amazingly, the average worker made $377 less than the average CEO made in an hour! The study also found that CEO pay increased an amazing 82% between 2000 and 2005, while the average workers' pay declined by 0.3%. This inbalance in pay has caused an uproar in Corporate America, as an increasing number of people question whether or not such large compensation packages are really needed to attract and retain talent.

These people are quick to criticize CEO pay, saying that it is a problem that boils down to basic corporate governance. They acknowledge that CEO pay is determined by the Board of Directors (a group voted in by shareholders); however, in two-thirds of all companies the CEO also serves as Chairman of the Board, which is clearly a conflict of interest. Moreover, the company often has extensive control over who is nominated to the Board of Directors. Only in extreme cases do majority shareholders get a seat on the Board; rather, the Board is most often hand-picked by management. And even if shareholders do wish to nominate other candidates, there are often large costs associated with the proxy process with no guarantees of success.

Who is this hurting? In the end, shareholders are most often left footing the bill. In addition to actual company money being spent on compensation, investors must also deal with the dilution of stock options and grants (often given as incentive). With the recent stock option backdating scandals hitting the market, this issue is being pressed even further. These people suggest that companies should work to tie CEO compensation packages closer to company performance, while also maintaining an independent Board of Directors to eliminate any conflict of interest.