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Jan 8, 2013

Why do so many of us get so bent out of shape about CEO compensation, but not about that of other relatively highly paid people?

That is the central question explored by Cornell University’s Kevin Hallock in his December Workspan column Research for the Real World, where he compares the growth in pay at the 95th percentile (top 5 percent) for CEOs and average U.S. workers to that of athletes in Major League Baseball, the National Basketball Association, the National Football League and the National Hockey League.

From 1995 to 2010, pay for this group of U.S. workers grew 69 percent while pay for the CEO group increased by 240 percent (one of those statistic that often provokes outrage).

Why no uproar over athletes and entertainers?

But pay for top NBA athletes also grew by 240 percent during that period, and top paid athletes from the other major sports is shown as growing at rates substantially above the U.S. worker (with the 95th percentiles of pay for the NFL, MLB and NHL players rising 200 percent, 175 percent and 125 percent respectively).

Why don’t we hear comparable cries of outrage over those stats?

There are other fields of endeavor beyond business and sports where people are highly paid, and where the gap between average and top earners is similarly wide. As examples of this, we can consider some of the figures that Forbes provides us for top earners in acting, writing and music.

  • Tom Cruise, as the top paid actor on the Forbes list, earned an estimated $75 million in 2011. His female counterpart, Kristin Stewart of Twilight fame, earned an estimated $35 million.
  • The two highest paid authors, James Patterson and Stephen King, earned a healthy $94 million and $39 million, respectively.
  • In music, Sir Elton John topped the list at $100 million, with Lady Gaga close behind him at an estimated $90 million.

This when plenty of actors, writers and musicians are earning practically nothing.Why do we find the high pay of one group of workers — CEOs — so much more inflammatory than the high pay of others?

Kevin Hallock shares a few potential hypotheses in his column. Could it be that CEO salaries are simply better known and more widely reported? Is it because most people have a clear sense of the limits of their own athletic (or acting, writing or musical) abilities, where the “gifts and talents” a top executive brings to the table are harder for most of us to discern and appreciate?

What’s your take?

This was originally published on Ann Bares’ Compensation Force blog.