A Continuing Debate: CEO to Employee Earnings Ratios

In this blog, we have written about compensation topics roughly seventy-five times. One controversial issue not covered by us until now: CEO to employee earnings ratios.

A Continuing Debate: CEO to Employee Earnings Ratios

In 2020, COVID-19 raged and the unemployment rate rose sharply. Yet, the CEOs at many large companies saw their compensation increase. As a result, the debate over the earnings ratios of CEOs versus employees escalated.

Annually, the AFL-CIO, the largest U.S. union, compiles earnings data. Below, we show highlights from the most recent survey:

The ratio of CEO-to-worker pay is important. A higher pay ratio could be a sign that companies suffer from a winner-take-all philosophy. Whereby executives reap the lion’s share of compensation. A lower pay ratio could indicate the companies that are dedicated to creating high-wage jobs. As well and investing in their employees for the company’s long-term health.

CEO-to-Worker Pay Ratios Vary Significantly by Industry: The ratio of CEO-to-worker pay remains highest in the consumer discretionary sector. Which includes companies like Amazon. Where the median worker made only $29,007 in 2020. In contrast, we see the lowest ratio of CEO-to-worker pay in the utilities sector. Which indicates the highest levels of private sector unionization rates. As reported by the U.S. Bureau of Labor Statistics.

Now, some data compiled by the AFL-CIO.