A Look at CEO to Worker Pay Ratios

A group of U.S. chief executive officers earned 140 times more last year than the median workers at their companies, according to a survey that gives a first glimpse of newly required pay ratio disclosures.

Thousands of U.S. companies – excluding emerging-growth companies and investment firms – will make their inaugural ratios known for the first time in the coming months. The requirement is part of the 2010 Dodd-Frank Act.

Jeremy Beadle

Released yesterday, the Equilar CEO Pay Ratio Survey noted that workers at the 356 public companies included in the report received median compensation of $60,000 annually. The median CEO pay ratio across the reporting companies was 140-to-1.

An interesting key finding was that the median CEO pay ratio increased in direct correlation to company revenue, while median employee compensation decreased in direct correlation to company revenue. The assumption might be that everyone benefits when a company generates more revenue than the previous year. Apparently that is not the case.

Some interesting longer-term trends in CEO compensation as reported in 2014 by the Economic Policy Institute:

  • From 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period.
  • The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013, far higher than it was in the 1960s, 1970s, 1980s, or 1990s.

 

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

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