A new report from PayScale, “CEO Salaries: How Much Do CEOs Make Compared to Their Employees?” examines CEO-to-worker pay ratios in light of the recent adoption of a final rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank Act), that requires a public company to disclose the ratio of its CEO’s compensation to the median compensation of its employees.
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Companies will be required to provide disclosure of their CEO pay ratios for their first fiscal year beginning on or after January 1, 2017. The rule is primarily to provide transparency to shareholders around CEO pay, but PayScale also wanted to examine employee sentiment on the topic.
Do employees know what their CEO earns? If so, do they think it’s fair? If they believe it’s not fair, does it negatively affect their perception of their employer? And, finally, does CEO pay have any effect on the ability of a company to retain its employees? Additionally, PayScale asked some CEOs to weigh in with their thoughts on the Dodd Frank Act and their approach to employee communication as it pertains to executive pay.
Equilar provided pay data for the highest-paid CEOs in the U.S. and PayScale provided median worker pay data for those same companies. PayScale calculated the total cash compensation pay ratio between the CEO at each company and their employees.
PayScale examined aggregated responses to both of these questions by gender, generation, job level, and pay range. PayScale excluded responses to questions with fewer than 40 responses. The data pool included 22,162 responses collected between June 9, 2016 and July 10, 2016.