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21:49

'CEOs don't want this released': US study lays bare extreme pay-ratio problem

The first comprehensive study of the massive pay gap between the US executive suite and average workers has found that the average CEO-to-worker pay ratio has now reached 339 to 1, with the highest gap approaching 5,000 to 1.

The study, titled Rewarding Or Hoarding?, was published on Wednesday by Minnesota’s Democratic US congressman Keith Ellison, and includes data on almost 14 million workers at 225 US companies with total annual revenues of $6.3tn.

Just the summary makes for sober reading.

In 188 of the 225 companies in the report’s database, a single chief executive’s pay could be used to pay more than 100 workers; the average worker at 219 of the 225 companies studied would need to work at least 45 years to earn what their CEO makes in one.

It also shows how some of the most extreme disparities in CEO-to-worker pay exist in industries that are considered consumer discretionary, such as fast food and retail, with a 977 to 1 disparity, one of the widest gaps.

“Now we know why CEOs didn’t want this data released,” says Ellison, who championed the implementation of the pay ratio disclosure rule as it was written into the Dodd-Frank financial reform bill of 2010. “I knew inequality was a great problem in our society but I didn’t understand quite how extreme it was.”

The requirements, long resisted by some of the largest US companies, simply tells companies to identify a median worker and then calculate how much the CEO makes in comparison to that person.

But the requirement triggered years of prevarication as companies claimed the method of calculating CEO compensation and median employee compensation had not been well defined. Some claimed that including workers employed abroad, especially in developing countries, would make pay ratio data even more extreme than it would be if calculated only within the US.

“If wealth is being concentrated into fewer and fewer hands, then obviously wealth is being dissipated from more and more people,” Ellison said. …

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