Listing companies with the highest average salary makes for an interesting read, but I always wondered how the average worker pay compared to the CEO’s pay in that same company.
Now, I know. With a new SEC ruling, public companies are now required to disclose what the pay ratio is between the CEO and the average worker. According to the AFL-CIO, this is important because this data “shows which companies are investing in their workforce to create high-wage jobs.”
I soon learned it’s not as easy as that, however.
First, on to a report by howmuch.net that reveals the top 20 best ratios (built from raw data from the AFL-CIO). I’ll start with number 20 and build to number 1, which is a surprise.
Note: average worker (median) pay is rounded in each case for simplicity.
20. Kimko Realty Corporation
CEO Conor Flynn pay of $5.6 million vs. median pay of $99,000 = 56:1 ratio.
19. Cerner Corporation
CEO Neal Patterson, $4.6 million. Median $70,000. 54:1 ratio.
18. Alliant Energy Corp
CEO Patricia Kampling, $6.5 million. Median $120,000. 54:1 ratio.
17. Cincinnati Financial Corporation
CEO Steven Johnston, $5 million. Median $92,000. 54:1 ratio.
16. American Water Works
CEO Susan Story, $4.4 million. Median $82,000. 53:1 ratio.
15. Zions Ban Corporation
CEO Harris Simmons, $3.4 million. Median $63,000. 53:1 ratio.
CEO Terry Spencer, $5.6 million. Median $106,000. 53:1 ratio.
CEO D. James Bidzos, $9 million. Median $172,000. 52:1 ratio.
CEO Joseph Hamrock, $5.4 million. Median $105,000. 51:1 ratio.
11. CMS Energy Corporation
CEO Patricia Poppe, $6.9 million. Median $168,000. 41:1 ratio.
CEO Thomas Herzog, $7.3 million. Median $181,000. 40:1 ratio.
CEO Mark Zuckerberg, $8.9 million. Median $240,000. 37:1 ratio.
8. Host Hotels & Resorts
CEO James Risoleo, $6.2 million. Median $180,000. 35:1 ratio.
7. DISH Network Corporation
CEO Charles Ergen, $2.4 million. Median $47,000. 33:1 ratio.
6. Intuitive Surgical
CEO Gary Guthart, $5 million. Median $157,000. 32:1 ratio.
CEO Marc Benioff, $4.7 million. Median $155,000. 30:1 ratio.
4. CSX Corporation
CEO E. Hunter Harrison, $151 million. Median $99,000. 27:1 ratio.
3. J.B. Hunt Transport Services
CEO John Roberts, $859,000. Median $57,000. 15:1 ratio.
2. Kinder Morgan
CEO Steven Kean, $382,000. Median $104,000. 4:1 ratio.
1. Berkshire Hathaway
CEO Warren Buffet, $100,000. Median $54,000. 2:1 ratio.
Given that most of us know Warren Buffett is one of the three richest people in the world, it surprised me his company appeared at the top of the list, at first. But then I didn’t know he only collected a CEO salary of $100,000, nor did I know the average worker at Berkshire makes “only” $54,000, both of which skews the ratio tremendously.
Which means this is a good time to point out a few plusses and minuses of this data.
What’s Useful About This Data
While anyone could look up CEO pay before the SEC ruling, now anyone can look up any S&P 500 company and see the average workers pay and thus the pay ratio. Access to median pay data is useful for prospective job seekers or switchers and helps keep pay competitive (transparency is a good thing for setting wages).
Access to CEO versus median pay ratio data highlights disproportionate discrepancies and can give (in some cases) consumers/customers another discerning factor on where to spend their money.
Public access to pay ratio data also puts another spotlight on ever-escalating CEO pay in general, which means more healthy skepticism and pushback on CEO pay–on many fronts. The average American’s pay and benefits have been growing at the slowest pace in 33 years, according to the Washington Post, while CEO pay soars, and that’s a good thing.
Additionally, research shows that the average American thinks the pay ratio is 30:1 when the average is actually closer to 300:1.
I smell more pressure on CEO pay just around the corner.
What’s Tricky About This Data
Companies have some discretion over what numbers are used to calculate the pay ratios. They can include employees of subsidiaries or contractors with higher pay in their figures, which artificially creates lower ratios. In the case of CSX, which had two CEO’s in the same year, they based the pay ratio off the prior CEO’s salary (not listed above) which netted a better ratio.
HR officials everywhere fret that public access to median pay salaries will over-sensitize workers and create many salary-dispute nightmares.
Many companies pushed back on the original SEC ruling because gathering the data can be much trickier and more labor-intensive than it would appear.
Some pundits have even said that while “average workers” benefit from salary comparisons, so can CEO’s. Thus, access to this data could have the unintended effect of further escalating CEO pay to attract or retain the best top executives.
I, for one, am all for the transparency, even if most of the ratios make me lose my rations.
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This article by Scott Mautz also appeared on Inc.com. To read more Inc. articles by Scott Mautz, click here.
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