Fortune 500 CEOs Are Paid Up to 5,000 Times More Than Their Employees

By Quentin Fottrell, MarketWatch

19 May 18

ransparency on executive pay shows how the other half lives.

Chief executive pay in the U.S. is among the highest in the world, according to a new report by the staff of Keith Ellison, a Democratic congressman for Minnesota. U.S. publicly-listed companies have begun releasing how much their CEOs make compared to the rest of their staff as required under a 2015 rule in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Ellison requested that his staff examine the ratios of the first 225 Fortune 500 companies to publicly disclose their CEO pay. These companies collectively employ more than 14 million workers and generate at least $6.3 trillion in revenue. Two-thirds of the top 1% of American households are headed by corporate executives, the report — “Rewarding or Hoarding?” — found.

Here are the key takeaways:

• Pay ratios of Fortune 500 company CEOs to their employees range from 2 to 1 to nearly 5,000 to 1. The average CEO/worker ratio is 339 to 1.

• At 188 of the 225 companies analyzed by the researchers a single CEO’s pay could be used to pay more than 100 workers.

• Median-salaried employees in all but six companies would need to work for 45 years to earn what their CEO makes in one year.

Income inequality has soared in the U.S. over the last five decades, despite increases in worker productivity, the report said. “Incomes for most Americans have been stagnant for four decades,” the researchers wrote. “Instead, this increase in income inequality was almost entirely driven by soaring compensation levels for the top 1% of income earners.”

The company with the smallest ratio in the database is Warren Buffett’s Berkshire Hathaway BRK.A, -0.69% with a ratio of 2 to 1. The company with the largest ratio is toy manufacturer Mattel MAT, -0.92% with a ratio of 4,987 to 1. In its filing to the Securities and Exchange Commission, Mattel said 78% of its workers, or 27,500 people, are employed outside of the U.S.

Median total compensation for CEOs

The median total compensation for Fortune 500 CEOs who had been in their role for at least two years was $11.5 million in 2016, an 8.5% increase from the previous year, a joint report by the Associated Press and the executive pay data firm Equilar released last year found. Not accounting for inflation, CEO pay spiked 19.6%, helped by a buoyant stock market.

Since 1985, Wall Street bonuses soared 890%, seven times the rise in the federal minimum wage, according to data by the New York State Comptroller and analyzed by the Institute for Policy Studies, a left-wing think tank in Washington, D.C., released in March 2017. The average Wall Street bonus rose 1% to $138,210 last year, more than twice the median U.S. household annual income.