Recently the U.S. Securities and Exchange Commission (SEC) announced a rule that companies have to show the ratio of what their chief executive made in a year compared to the total median compensation of all employees. The number is often in the hundreds because so many CEOs make millions of dollars. However, at some companies, the figure is over 1,000 times. At a few, the number is much higher: 3,000 times what their employees make.
The Institute for Policy Studies annual CEO pay study looked at the pay gap at the 500 largest publicly traded companies. Among the findings were that 393 companies paid their CEOs over 100 times more than the median of their workers. At 50 companies, the ratio was much more substantial. The researchers who prepared the study showed that, “At the 50 publicly traded U.S. corporations with the widest pay gaps in 2018, the typical employee would have to work at least 1,000 years — an entire millennium — to earn what their CEO made in just one.”
Five CEOs made over 3,000 times the median salaries of their workers last year. In first place was one of the most famous CEOs in America. Tesla’s chief, Elon Musk, earned 40,668 more than his median employee. Musk’s compensation is complex, based on an SEC formula. It includes stock options that will vest over 10 years. To get all those options, Tesla’s market cap must reach $650 billion. It is just above $40 billion now.
The next two CEOs on the list run retailers. Abercrombie & Fitch CEO Fran Horowitz Bonadies made $8,481,742. The ratio to her workers was 3,660. Over the past several years, Abercrombie & Fitch has been among America’s troubled retailers. Gap, owner of the Gap and Old Navy brands, has had similar problems. Its CEO, Arthur Peck, made $20,793,939, or 3,566 times the media pay for the workers.
The CEO of toymaker Mattel made 3,408 times its workers with a total pay package of $18,707,283. Finally, health care equipment company Align Technology paid CEO Joseph Hogan 3,168 more than the median employee compensation with a pay package worth $41,758,338.
Among the arguments made that CEO compensation at many companies is too high and worker pay is too low is that some of these companies pay their workers sums that put them at close poverty-level income. It begs the question of whether any CEO should be paid millions of dollars under those circumstances. The other debate is over whether any CEO should make tens of millions of dollars at all give the contributions to the success of all the company’s workers. 24/7 Wall St. looked at the issue more deeply with an analysis of U.S. CEOs who make 1,000 times what their workers do.
No matter what the argument is about whether CEO pay is excessive or whether companies should pay sums that keep employees above the poverty levels pay ratios above 3,000 times, worker levels are wildly extravagant.