Attempting to both empower shareholders in the post-crisis era and curb unjustified CEO pay, the Securities and Exchange Commission ruled in 2015 that public companies in the US must report how much their CEO earn, in relation to the salary of their median employee. Equilar, a data firm that tracks executive compensation, surveyed 356 companies to find out the CEO pay ratio that they plan to disclose in their 2018 proxy statements, and the company released its report last week.
The median ratio was 140:1.
Keep in mind that medians are the middle numbers in a set, not the average. At the 25th percentile, the ratio was 72:1, and it was 246:1 at the 75th percentile—meaning there are even higher gaps than that. The average ratio of CEO to median worker pay, across those 356 companies, was 241:1.
Ratios swung widely depending on a number of factors, including company size, location, and employment sector. Below are the industries with the highest pay gaps between CEOs and rank-and-file workers:
|Food, beverage, tobacco|
|Health care equipment and services|
On the other hand, the smallest gaps:
|Technology hardware and equipment|
|Software and services|
“There has been a high level of anticipation building up since this rule was passed, and that’s reflected in the large number of responses to our survey,” Matthew Goforth, the Equilar researcher who led the analysis, said in a release accompanying the report. “We know that compensation is not monolithic, and this survey—and eventually, the required disclosure—starts to shed light on that.”
Equilar’s survey, which offers one of the first glimpses into the official ratio disclosures rolling out thanks to the 2015 ruling, is still only one sample. Previous calculations for average CEO-to-worker pay ratio in the US have been as high as 372-to-one—and the country’s soaring executive pay growth, especially when compared to that of the rest of the world, has raised eyebrows in recent years. Hence, the SEC’s request for companies to report their CEO’s pay in relation to their workers’ pay. And even getting that (paywall) was a tough fight.