By Jerri Stroud
Of the Post-Dispatch


The gap between executive pay and the pay of average workers widened last year in St. Louis and around the country.

Chief executives of 56 public companies in the St. Louis area received $2.83 million on average last year - or 70 times the $40,594 that an average worker in private industry earned in the Missouri part of the metropolitan area. In 2003, the average CEO earned 54 times the average employee's pay.

The gap was even wider in the Illinois part of the metro area, where average pay data are available by county rather than areawide. The CEOs took in 83 times the average $34,020 earned by a worker in Madison County, 94 times the pay of St. Clair County workers and 104 times the $27,216 earned by an average worker in Monroe County.

But executive pay in this area still lags national averages. A study by Pearl Meyer & Partners for The New York Times earlier this year showed that the average CEO earned $9.84 million, or 358 times the average worker's pay last year. The multiple was up from 300 times an average worker's pay in 2003 and 42 times in 1982.

CEO pay was up 36 percent on average last year in St. Louis, while most workers made do with increases of 3 percent or less. Higher costs for health care coverage usually ate up any gains by lower-paid workers.

"Workers are losing ground," said Brandon Rees, a research analyst with the AFL-CIO's office of investment. "The average non-supervisory employee received a 2.2 percent increase, which was less than inflation."

Bigger salaries, bonuses and stock-related pay are driving executives' increases, said Jim Sillery, a vice president in Pearl Meyer's Chicago office.

The chasm between executives' and ordinary workers' pay began opening in the 1990s, when stock options became a popular form of executive pay. A bull market in the 1990s gave executives big gains on their options, "catapulting their pay past the pay of other workers," he said.

Even when companies give bonuses to lower-level workers, those bonuses tend to be in the range of 5 percent to 10 percent of pay, Sillery said. Top executives can earn bonuses of twice their salaries, not counting the value of stock-based pay and other long-term incentives.

Some pay consultants say executives should be rewarded richly because they have a much bigger impact on companies than other employees.

"The CEO is the most critical person in the company," said Bob Damon, North America President for Korn/Ferry International of Los Angeles. "We have to face the facts that a talented Fortune 100 CEO has the same value as a talented baseball player."

But wide gaps in pay can be a two-edged sword, said Scott Klinger, corporate accountability coordinator at United for a Fair Economy, an advocacy group that monitors the concentration of wealth in American society.

"I think the problem with these huge gaps is that it sends a signal that some people are valued and others aren't," Klinger said. "I can't imagine what it would be like to be a worker who gets a pink slip and then sees executives who made bad decisions get a retention bonus."

The requirement that companies record an expense for stock options given to executives should restrain companies "from handing them out like candy," Klinger said. Public companies must begin expensing options in fiscal years that begin after June 15 or in the next calendar year.

Some companies, including Anheuser-Busch Cos., began expensing them this year. If the company had expensed the options granted last year, A-B's profit would have been reduced by $121.6 million, or 15 cents a share.

Monsanto Co., which will start expensing options in the fiscal year beginning Sept. 1, said expensing options last year would have reduced profit for its 2004 fiscal year by $13 million, or a nickel a share.

Shareholder resolutions that seek to limit pay are garnering more support every year, according to a study by the Investor Responsibility Research Center in Washington. In 2004, the average vote for executive compensation proposals was 21 percent, up from 19.7 percent in 2003. The percentage of shareholders voting for proposals that seek to limit or change executive pay has risen steadily since 2000.

"There definitely continues to be disgust over this issue," said Julie Tanner, corporate advocacy coordinator for Christian Brothers Investment Services in New York.

After Tanner introduced a resolution seeking to reduce the disparity in pay between executives and lower-level employees at Time-Warner Inc., stockholders pummeled executives at the annual shareholder meeting with questions for 15 minutes.

"I've never seen that level of anger," Tanner said.
Reporter Jerri Stroud
E-mail: jerristroud@post-dispatch.com
Phone: 314-340-8384