Fueled by a surging stock market, CEO compensation climbed to its highest level in seven years last year and could be poised to rise again in 2020, despite the widespread layoffs and pay cuts of the coronavirus recession.

The Economic Policy Institute, a left-leaning think tank, found that chief executives of the United States’ 350 largest companies earned an average of $21.3 million in realized compensation in 2019, setting the ratio of CEO-to-worker pay at 320 to 1, up from 293 to 1 in 2018 and more than five times as high as the 61-to-1 ratio in 1989.

Details about CEO pay lag, because they are shared in corporate proxy statements, which are typically released early in the following year before many companies’ spring annual meetings. As a result, the lofty numbers have landed during a time when the pandemic has devastated the labor market and income inequality has become an election campaign issue.

“CEOs are not doing well just because they’re at the high end; they’re doing far better than everyone else at the high end,” said Larry Mishel, senior labor economist at EPI.

Between 1978 and 2019, according to EPI’s analysis, CEO compensation, adjusted for inflation, rose 1,167 percent, much higher than the top 0.1 percent of wage earners, whose pay grew 337 percent between 1978 and 2018 (the most recent year available). Meanwhile, the typical workers’ compensation, using figures that primarily rely on Bureau of Labor Statistics data for wages of a full-time worker in each industry, grew by 13.7 percent over the past four decades.

In its annual report, EPI uses a “realized” compensation measure that counts the value of stock options when they are cashed and of stock awards when they become vested, meaning they are owned by the executive. In 2019, that approach resulted in a higher figure than calculating CEO pay by grant date, or options’ and awards’ value when they are granted to executives. By that measure, CEO compensation grew by 8.6 percent in 2019, to $14.5 million.

Mishel believes the “realized” approach better reflects the CEO’s taxable income for that year, whereas the granted calculation is based on a formula to determine value that he said can be “premature.”

Many companies have said their CEOs and other top executives would take pay cuts in 2020 as the coronavirus pandemic slashed financial forecasts and companies furloughed or laid off workers. FedEx, for instance, said it would cut CEO and Chairman Frederick W. Smith’s base salary by 91 percent for a six-month period, while global insurer Aon cut the base salary of its top executives by 50 percent in April as part of a broader pay cut (it has since restored and paid back cuts for employees but kept the temporary salary cuts in place for top executives).

But Mishel said many people don’t understand that base salary and annual cash bonuses make up a relatively small proportion of the overall pay package for many chief executives.

“CEO compensation over the last few decades has pretty well tracked the stock market, because around 75 percent of CEO compensation is stock awards and stock options,” Mishel said.

Boards of directors argue that CEO pay is tied to the stock market to align executives’ interests with shareholders’ interests, but Mishel said broader economic trends or policy changes, such as tax cuts, can lift company shares for reasons outside of individual CEO decisions.

A July analysis by CGLytics, a corporate governance data firm, found that of the 419 companies in the Russell 3000 index that had shared details about salary cuts, two-thirds of CEOs took reductions that equaled just 10 percent or less of their 2019 compensation.

That’s why Mishel believes it’s possible that CEO pay could rise in 2020 as the stock market has recovered and is flirting with record highs. If that happens, it would mark a divergence from the last two recessions when CEO pay fell, according to EPI data, in 2001 and 2002 after the high-water mark in 2000, and in 2008 and 2009, amid the financial crisis.

Robin Ferracone, CEO of executive compensation consultancy Farient Advisors, said that while a rise in average 2020 pay for CEOs is possible, it will probably be flat or a little down at the average. In addition to salary cuts and probably lower annual bonuses, many long-term stock incentives for CEOs are called “performance shares,” which are tied to underlying financial metrics that are likely to worsen for many companies.

Still, she said, compensation committees will need to be mindful about how results will resonate with employees, outsiders and investors.

“If a median worker feels prosperous and that they’ve been treated pretty well, they’re fine with the CEO taking home millions upon millions,” she said. “The problem is when the median worker is no longer feeling prosperous. ... That is going to be the test this year.”

Read more: