The disparity between CEO pay and average worker wages has become contentious in recent years. It’s easy to see why: the average CEO-to-worker pay ratio for S&P 500 companies is 268-to-1. As the wealth gap widens, questions arise about the fairness and sustainability of such a significant pay ratio. The team at Madison Trust examined the S&P 500 companies ranked by CEO-to-worker pay ratio to shed light on this topic. See the highest and lowest ratios below:
Understanding CEO-to-Worker Pay Ratio
The CEO-to-worker pay ratio is a metric that compares the compensation of a company's CEO to the median salary of its employees. Essentially, it provides a snapshot of the income inequality within a corporation. A high ratio suggests a substantial difference between the top executive's pay and that of the average worker.
The S&P 500: A Benchmark of CEO Pay
The S&P 500, a leading index of 500 large-cap U.S. stocks, is often used as a benchmark for CEO pay. By analyzing the pay ratios of these companies, we can gain insights into broader trends in executive compensation.
As this table shows, companies have a wide range of pay ratios. Some have relatively modest ratios, while others exhibit extreme disparities. This variation can be attributed to several factors, including industry differences, company size, and corporate governance practices.
The Rise of CEO Pay: A Multifaceted Phenomenon
The dramatic increase in CEO pay over the past few decades is a complex issue with no single explanation. Several factors have contributed to this trend:
- Performance-Based Compensation: Many companies tie CEO pay to performance metrics such as stock price and earnings. This incentivizes executives to maximize shareholder value, but it can also lead to excessive compensation, especially if the metrics are manipulated or biased.
- Board Influence: Corporate boards play a crucial role in determining CEO pay. If board members are too closely aligned with management or lack the necessary independence, they may be more likely to approve excessive compensation packages.
- Market Forces: The competitive nature of the executive labor market can drive up CEO pay. Companies may feel compelled to offer high salaries and perks to attract and retain top talent.
- Economic Inequality: The overall trend of increasing income inequality in the United States has also contributed to the rise of CEO pay. As the gap between the rich and the poor widens, it becomes easier for executives to justify higher compensation. CEO pay has indeed skyrocketed since the late 1970s.
The Implications of High CEO Pay
The high CEO-to-worker pay ratios prevalent in the S&P 500 raise concerns about fairness, equity, and corporate oversight. Some argue that excessive CEO pay can lead to:
- Reduced investor returns: If CEOs prioritize their own compensation over long-term shareholder value, it can negatively impact the company's performance and stock price.
- Demoralized workforce: A wide pay gap can create a sense of resentment and disengagement among employees, leading to lower productivity and increased turnover.
- Weakened public trust: The perception of excessive CEO pay can erode public trust in corporations and the capitalist system.
Addressing the CEO Pay Gap
To address the issue of high CEO pay, policymakers, investors, and corporate boards have proposed various solutions, including:
- Mandatory disclosure: Requiring companies to disclose their CEO-to-worker pay ratios can increase transparency and public scrutiny.
- Shareholder voting: Giving shareholders a say in executive compensation can help hold CEOs accountable for their performance.
- Tax reforms: Implementing progressive tax policies that penalize excessive income inequality can discourage excessive CEO pay.
- Enhanced corporate governance: Strengthening corporate boards and improving oversight practices can help ensure that CEO pay is aligned with the interests of shareholders and employees.
The debate over CEO pay is unlikely to end any time soon. As the wealth gap persists, finding ways to promote a more equitable distribution of income and rewards is essential. By understanding the factors driving high CEO pay compared to average workers and exploring potential solutions, we can work toward a more just and sustainable economy.
At Madison Trust, we can help you build a solid retirement plan regardless of your salary. We offer a variety of self-directed IRAs, including simple IRAs, Roth IRAs, and SEP IRAs.
Top 20 Companies With the Highest CEO-to-Worker Pay Ratios
Ross Stores, Coca-Cola, and Charter Communications have the highest CEO-to-worker pay ratios among the top 20 listed. These companies have faced scrutiny for the significant disparity between their CEOs' compensation and the average salaries of their employees. The disparity raises questions about the fairness and sustainability of such high executive pay, particularly in the context of rising income inequality and concerns about corporate governance. Read on for the full top 20 list:
|
Company |
Pay Ratio |
Median Worker Pay |
CEO Total Compensation |
|---|---|---|---|
|
1. Ross Stores, Inc. |
2,100:1 |
$8,618 |
$18,094,944 |
|
2. Coca Cola Co. |
1,799:1 |
$13,752 |
$24,742,908 |
|
3. Charter Communications, Inc. |
1,635:1 |
$54,476 |
$89,077,078 |
|
4. Aptiv PLC |
1,545:1 |
$11,647 |
$18,000,136 |
|
5. Accenture PLC |
1,526:1 |
$20,670 |
$31,550,906 |
|
6. Tjx Companies Inc. |
1,496:1 |
$14,857 |
$22,222,769 |
|
7. Chipotle Mexican Grill Inc. |
1,354:1 |
$16,595 |
$22,473,427 |
|
8. Align Technology Inc. |
1,271:1 |
$22,781 |
$28,952,411 |
|
9. ON Semiconductor Corp. |
1,268:1 |
$15,746 |
19,965,513 |
|
10. Mcdonald’s Corp. |
1,212:1 |
$15,802 |
$19,155,001 |
|
11. Yum Brands Inc. |
1,205:1 |
$17,628 |
$21,238,955 |
|
12. Bath & Body Works, Inc. |
1,189:1 |
$9,834 |
$11,694,513 |
|
13. Jabil Inc. |
1,163:1 |
$8,804 |
$10,237,971 |
|
14. Starbucks Corp. |
1,028:1 |
$14,209 |
$14,604,531 |
|
15. Walmart Inc. |
976:1 |
$27,642 |
$26,968,924 |
|
16. Nike, Inc. |
975:1 |
$33,646 |
$32,789,885 |
|
17. Ulta Beauty, Inc. |
960:1 |
$13,193 |
$12,663,880 |
|
18. Western Digital Corp. |
958:1 |
$11,519 |
$11,031,692 |
|
19. Royal Caribbean Cruises Ltd. |
953:1 |
$18,073 |
$17,216,276 |
|
20. Seagate Technology Holdings PLC |
948:1 |
$12,065 |
$11,436,208 |
Top 20 Companies With the Lowest CEO-to-Worker Pay Ratios
|
Company |
Pay Ratio |
Median Worker Pay |
CEO Total Compensation |
|---|---|---|---|
|
1. Airbnb, Inc. |
1:1 |
$243,757 |
$295,125 |
|
2. Take Two Interactive Software Inc. |
2:1 |
$75,276 |
$115,015 |
|
3. Berkshire Hathaway Inc. |
5:1 |
$76,726 |
$413,595 |
|
4. Expedia Group, Inc. |
10:1 |
$105,372 |
$1,009,900 |
|
5. Biogen Inc. |
23:1 |
$173,764 |
$4,069,913 |
|
6. NVR Inc. |
23:1 |
$75,700 |
$1,763,200 |
|
7. Alphabet Inc. |
29:1 |
$304,930 |
$8,802,824 |
|
8. Vici Properties Inc. |
30:1 |
$376,391 |
$11,277,678 |
|
9. Healthpeak Properties, Inc. |
32:1 |
$238,548 |
$7,692,510 |
|
10. Essex Property Trust, Inc. |
37:1 |
$93,662 |
$3,076,648 |
|
11. Paycom Software, Inc. |
39:1 |
$79,173 |
$3,118,606 |
|
12. Copart Inc. |
44:1 |
$45,224 |
$2,009,000 |
|
13. Physicians Realty Trust |
44:1 |
$109,629 |
$4,807,847 |
|
14. Regeneron Pharmaceuticals, Inc. |
49:1 |
$165,843 |
$8,184,338 |
|
15. MarketAxess Holdings Inc. |
50:1 |
$167,000 |
$8,293,086 |
|
16. Corpay |
53:1 |
$50,798 |
$2,669,024 |
|
17. Evergy, Inc. |
53:1 |
$105,724 |
$7,138,724 |
|
18. Nisource Inc. |
53:1 |
$174,408 |
$9,216,680 |
|
19. Alliant Energy Corp. |
56:1 |
$173,346 |
$9,709,782 |
|
20. Dominion Energy, Inc. |
56:1 |
$112,683 |
$6,278,835 |
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