Greed is Not The Reason CEO Pay is So High Right Now

Many Americans have expressed their anger over the trend of increasing CEO pay, but many say the anger is misguided.

CEOs of the largest U.S. companies have been receiving pay increases over the past few years, with their pay rising by 5.5 percent from 2012 to 2013, according to a Wall Street Journal report.

Last year, healthcare CEOs were paid more than executives in other industries. The median pay for healthcare CEOs was $12.3 million last year, up 13 percent from 2012.  

With the median pay package of CEOs of S&P 500 companies being 257 times more than the salary of their average employee, many have expressed the view that CEO pay rates represent inequality in America, according to a Business Insider report.

Those who support CEOs' annual pay have said the increase is a result of a healthy stock market. They say CEOs are making more money than they were a few years ago due to U.S. stocks being at all-time highs.

"As the public cried for executives' pay to be tied to performance, that trend has very much happened," said Kevin Scott, co-founder and CEO of Atlanta-based ADDO Institute, a branding consulting firm, in the Business Insider report. "And now, as their stocks are performing at very high levels, those CEOs are reaping the benefits."

In May, the American Hospital Association sent a letter to the editor of The New York Times in response to an article that examined the effect rising executive salaries have on total healthcare spending. In the letter, AHA President and CEO Rich Umbdenstock noted hospital executives have complex and demanding jobs, and compensation at tax-exempt hospitals is subject to a "rigorous process" prescribed by the Internal Revenue Service.

Steven Neil Kaplan, PhD, a professor at The University of Chicago Booth School of Business, who has extensively researched and written on executive pay in America, believes greed is not what is causing the inequality some see in CEO pay. "If you look at CEO pay compared to the average pay of people in the top 0.1 percent, it's about where it was 20 year ago — in line with that of lawyers and private-company executives, and less than hedge-fund managers," said Dr. Kaplan, in the Business Insider report.

More Articles on Executive Compensation:

10 Highest-Paid Hospital Executives in Washington
Healthcare CEO Pay Trumps Other Industries
AHA Criticizes Article on Healthcare Executive Compensation