The New York Times found that mean CEO pay at 200 large companies increased 27 percent in 2005, to $11.3 million. The Times noted that CEO pay at big companies is more than 170 times average worker pay. In fact, this is a major underestimation. Based on Bureau of Labor Statistics data indicating an average salary of about $28,000 for a production worker, these CEOs earn on the order of 400 times the pay of ordinary Americans.

While pay for CEOs is rising by double-digit percentage points every year, wages for average workers are falling behind inflation, meaning that real wages are declining. The argument is often advanced that companies cannot afford to pay high wages or benefits to workers—who can be replaced with workers in lower wage countries—even as tens of millions of dollars are routinely doled out to top executives, whose skills are supposedly irreplaceable. Treasury Secretary John Snow recently explicitly defended the pay of CEOs on the basis that their salaries were the product of efficient market forces of supply and demand. “In an aggregate sense,” he said in an interview with the Wall Street Journal published March 20, “it reflects the marginal productivity of CEOs.”

What is really involved, however, is not differential compensation based on the value added to the company, but rather a massive transfer of wealth from the bulk of the population into the hands of the ruling elite. To keep investors happy, executives oversee job cuts and cost reductions, and if they are successful, stock prices soar and the executives themselves reap the rewards.

The extraordinary rise in CEO pay is part of a long-term trend in which management of major US companies has been increasingly subordinated to the immediate financial interests of Wall Street and the major investors. When profit rates in the United States began to decline in the 1970s, an attempt was made to counteract this tendency with CEOs tasked with pushing through job, wage and benefit costs in order to boost earnings. The trend continues today with individuals such as Delphi’s CEO Robert Miller, who was hired explicitly to implement massive cuts in labor costs to the detriment of tens of thousands of workers.