It wasn’t long ago, when the economy was much more volatile, that the enormous salaries many CEOs were receiving—especially compared to the average salaries of their employees (i.e., what’s called the CEO Pay Ratio)—was a tinderbox issue, inciting the angst of the 99% and catalyzing the enactment of legislation like the Dodd-Frank Act.

In the years since Dodd-Frank’s introduction, there have been hotly debated proposals, lobbying efforts, thousands of public comments, and numerous rounds of SEC interpretations, after which the rules finally became effective for proxies filed in 2018. Now, for the first time, we have information not only with respect to CEO pay (now disclosed in proxy statements), but about median employee pay.

A new study from executive compensation consultancy Pearl Meyer reveals the ratio is still enormous—the average CEO Pay Ratio is 144:1 and the median ratio is 69:1. But there are numerous outliers, including several cases where CEOs did not receive pay at all, or were paid a nominal sum.

Pearl Meyer analyzed more than 45 data points for each of 2005 public company proxy filings available on June 30, 2018. Industry, firm revenue, number of employees, and percentage of a company’s workforce based outside the U.S. had important impact on the average CEO Pay Ratios.

PR pulse: Are Americans still outraged by massive CEO salaries?

“While the CEO Pay Ratio has not proven to be the lightning rod issue many anticipated, it is now a required data point in the executive compensation conversation and one that directors and management teams must fully understand,” said David Swinford, president and CEO of Pearl Meyer. “Our findings from this research are consistent with our expectations and show that comparisons among peer companies are ill-advised. Boards should know where they stand from a disclosure standpoint, but should not undertake any compensation program changes based on the number.”

As expected, the consumer discretionary industry has the highest ratios with an average of 384, while the utilities, financial, and energy industries are lowest.

PR pulse: Are Americans still outraged by massive CEO salaries?

Additional key findings:

  • Average median employee total compensation is $80,992 and is highest among companies with fewer than 500 employees.
  • There is no correlation between the CEO Pay Ratio and company performance (as measured by three-year average total shareholder return).
  • There is no correlation between the CEO Pay Ratio and CEO tenure, and CEO tenure across companies tends to be fairly consistent at between 6.5 and 7.5 years.

PR pulse: Are Americans still outraged by massive CEO salaries?

Pearl Meyer recently released the research report The CEO Pay Ratio: Data and Perspectives from the 2018 Proxy Season, based on information from Main Data Group, and published in conjunction with NACD.  Read the full report here.

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Richard Carufel

Richard Carufel

Richard Carufel is editor of Bulldog Reporter and the Daily ’Dog, one of the web’s leading sources of PR and marketing communications news and opinions. He has been reporting on the PR and communications industry for over 12 years, and has interviewed hundreds of journalists and PR industry leaders.

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