We recently released a new visualization highlighting companies with the largest pay gaps between their CEOs and their average worker. The latest SEC rule requiring companies to publish these figures doesn’t always mean that a company is put in a negative light. In fact, the figures also indicate the companies where the average Joe and a CEO aren’t so far apart on the pay scale.
Similar to our previous article, we found our numbers through the AFL-CIO, a labor union with an interest in the wellbeing of normal workers. We placed a photo of each CEO directly above his or her compensation and the median worker’s pay. We then drew a circle representing the gap between the two CEOs. This approach lets you quickly see which companies compensate their CEOs and average workers at about the same levels.
Pay ratios can be a tricky thing because there are two ways to make it onto this list. First, as you might expect, a company can pay its workers an extremely high wage, usually in the hundreds of thousands of dollars. This is most commonly seen in technology companies like Facebook or Saleforce.com. Many of the other companies on the list are small tech startups. The people who work for these companies are in very high demand, and their companies are forced to pay higher wages as a result. This in turn creates a favorable pay ratio in our visualization.
But a company doesn’t necessarily have to pay its workers a great wage to create a better pay ratio. Instead, a company might pay its CEO a nominal salary because he or she is already independently wealthy. This would have the effect of artificially closing the gap between the chief executive and average workers. Berkshire Hathaway, the top company in terms of pay ratios, is a case in point. Warren Buffett is already worth about $85 billion, so it’s not like the company can incentivize him with a high salary.
The last thing worth mentioning is that companies have a lot of discretion over what they count in these numbers. For example, companies can decide whether to include employees of subsidiaries when calculating median pay. Suppose a company has lots of underpaid contractors doing the real work, while relatively few people enjoy regular employment status. In fact, some of the names listed on our visualization don’t pass the smell test. It’s very likely they excluded most of their workforce in coming up with these numbers, but we won’t mention their names here.
One more thing: these companies have the lowest pay gaps between CEOs and average workers, but pause for a moment. The lowest pay gaps are still 30 to 50 times the average person’s income. For every $1.00 the average Joe brings home, the average CEO on our list makes $38.80. Although these pay gaps aren’t that big compared to the rest of corporate America, there’s still a massive difference in compensation.
Data: Table 1.1