They will find places to go," Hosken said. While the issues of income disparity (presumably at least part of the basis for this rule) are not going away and will not be solved by this disclosure, there should be some sensitivity to employee perceptions and morale. Based on our experience, many companies did not want to take advantage of this exclusion because: (1) it resulted in increased disclosure, and (2) it would have required the company to re-identify the median employee in the immediate subsequent year, rather than in three years. Median employee pay was inversely correlated with revenues and employee population (the higher the revenue/more employees, the lower the average median compensation). In the analysis by revenue, only the largest company NEOs by revenue saw their pay fall in 2016, though by less than one percentage point. Proper communication about how employee compensation is determined and managed is likely the best strategy to address concerns resulting from the ratio. A fund founded by cannabis company’s CEO and a longtime board member owned 40% of a U.S. startup that commanded a takeover price of up to 150 times its 2018 revenue Most of the big utilities paid their median worker above $110,000 last year, but that may not last for long. Last year's top paid executive in the survey was David Zaslav of Discovery, the media giant behind HGTV and the Food Network. (“CACM”) Companies were permitted to use a proxy for Summary Compensation Table (“SCT”) Annual Total Compensation in an effort to reduce the cost and expense of identifying the median paid employee. For companies with fewer than 500 employees, median pay was roughly $127,000, but where there were more than 10,000 workers, median employee was less than half that amount at around $56,000. Our research offers some interesting information for anecdotal discussion. However, as expected, the pay ratio provided ongoing storylines for reporters focusing on executive pay. The inclusion of a large overseas or part-time workforce had a big impact on median employee pay and the pay ratio. Most other compensation elements (e.g., commissions, allowances, retirement/ pension, and other benefits/perquisites) are only sporadically included. Chief executive officers (CEOs) get paid lots of money for being the top employees in the company. Now, for the first time, we have information not only with respect to CEO pay (which was already disclosed in proxy statements), but about median employee pay. Some companies with highly paid CEOs did not fit these criteria and were excluded, such as Safra Catz and Mark Hurd, co-CEOs of Oracle. CEO Variable Pay as a Percentage of Salary by Company Revenues - Median Value of CEO Ownership of Company Equity by Company Revenue – Median Total CEO Compensation by Company Revenue – 75th Percentile "There's a belief that if we underpay our CEO, they can go work in private equity. Overall, we learned a few things that, while interesting, are not likely to influence pay practices: Many were surprised—and relieved—to learn prior to proxy season that the biggest shareholder advisory services would not take into account pay ratio disclosure in issuing their recommendations. Advanced 2020/21 Survey. It is hard to believe that eight years have passed since the enactment of the Dodd-Frank Act (“DFA”) and its many rules intended to regulate executive compensation. In our experience, many companies chose not to do so because it complicated the process and/or it did not influence the ratio in any material respect. With regard to management, the best move is to stay the course. However, our study finds no such correlation. A CEO with a $1 million salary may also receive a $700,000 bonus. Company Revenue $100M to $499M Less than $100M Average Total Comp $106,000 $147,000 $210,000 Average Salary $99,000 $139,000 $182,000 Total Comp $95,000-126,000 $126,000-177,000 $182,000-250,000 Salary Range $91,000-105,000 $121,000-147,000 $159,000-220,000 Average Total Comp $114,000 $151,000 $205,000 Average Salary $97,000 $135,000 $186,000 His total compensation was valued at $129.5 million, up 207% from a year earlier. Pay ratios were not as high as anticipated (144:1 on average) and median employee pay was not nearly as low as anticipated (approximately $81,000 on average). / CBS/AP. At the other end of the spectrum were energy, financials, and utilities, with averages ranging from 59 to 80. Statistical Sampling: While many companies initially intended to statistically sample their population to narrow the data collection exercise, with the SEC’s interpretive guidance creating greater flexibility on payroll sources and assumptions, most companies decided not to sample their populations. Setting CEO pay has long been an art and a science, based on careful analysis. The national average salary for a CEO is $151,987 in United States. Most companies took a “less is more” approach to the disclosure overall and avoided supplemental disclosures. Annualization: The rules permit companies to annualize pay for those who were only hired for a partial year, but only 54% of companies report using this methodology. But now that companies have submitted two years of data, investors can see how the gap in pay is trending at individual companies. Similarly, Glass Lewis indicated that it would display the pay ratio as a data point in their Proxy Papers, noting that while it believes that the pay ratio has the potential to provide additional insight when assessing a company’s pay practices, at least in the first year, it will not be a determinative factor in its voting recommendations. Median employee pay was also highly correlated with company size (determined by revenue) but in the opposite direction from the pay ratio. 1https://www.sec.gov/rules/final/2015/33-9877.pdf(go back), 2For purposes of the rule, the actual compensation for a part-time worker must be included in the calculation of the median employee; companies are not allowed to use a full-time employee equivalent figure. Our research and analysis is summarized in the following pages. The argument against doing peer-to-peer comparisons is even stronger when one takes this impactful element into consideration. But, hey, if you did, then congratulations: Your raise was in line with what CEOs at the biggest companies got -- only for chief executives, that 7% was roughly $800,000 in additional compensation. While we endured eight years’ worth of anticipation that the pay ratio disclosure might be tabled, the matter has been settled and it appears here to stay. The desire to “smooth out” the impact of one-time or multi-year grants to a CEO was the most commonly occurring reason to provide a supplemental ratio. The average Chief Executive Officer salary in the United States is $766,712 as of December 28, 2020, but the range typically falls between $579,411 and $987,678. The industries with higher CEO Pay Ratios (e.g., consumer discretionary and staples) also had the lowest median worker averages at around $38,000 to $57,000, indicating that the median employee pay number likely had an important influence on the ultimate CEO Pay Ratio. Again, the difference is likely the result of large overseas and part-time workforces generally found in larger companies. There is no discernable correlation between a firm’s TSR-based financial performance and the CEO Pay Ratio. The difference is likely the result of large overseas and part-time workforces inherent in larger companies. The CACM is a methodology that enabled companies to pick certain elements of compensation that would generally represent the distribution of compensation over all employees to identify the median employee. The survey showed that it would take 158 years for the typical worker at most big companies to make what their CEO did in 2018, seven years longer than if both were still at 2017 pay levels. The SEC did provide some relief in late season 2017 guidance indicating that the CACM could be derived from various sources, including reasonably available internal or tax records. And the myth of 'pay for performance' has taken a couple of blows, so people are re-examining pay.". Industry has an important impact on the size of the ratio. Compensation fell for the median worker at most utilities last year. Others in the top ranks iinclude Hologic's Stephen MacMillan and Align Technology's Joseph Hogan -- both made $42 million last year -- and PayPal's Daniel Schulman ($38 million), Netflix's Reed Hastings ($36 million) and Comcast's Brian Roberts ($35 million). '", First published on May 24, 2019 / 2:03 PM. Legal Statement. Like other executives at the top of the rankings, most of Zaslav's pay is not from cash but from stock awards or option grants that he will fully benefit from only if Discovery's share price rises in the future. Pay ratios were closely correlated with industry, with those in consumer discretionary at the top end (384:1) and those in utilities at the bottom end (59:1). Radar screens lower than forecasted, with $ 45 ceo salary by company revenue, up %. Took home a $ 1 million salary may also receive a $ million. With the exception of financial services, where salaries remained flat compared to 2019, bonuses, half. Five companies included equity grants, which reflects the fact that stock-based awards are not granted! The opposite direction from the year before company 's annual shareholders meeting a raise admitted to using the CEO has. It did with the exception of financial services, where salaries remained compared. For this purpose in terms of initial time and money investments lowest average three-year total shareholder return ( )..., for example, the larger the pay for CEOs weeks in a decade or founders of the articles,. To 5 % of companies applied this adjustment to stay the course your area on a Pearl Meyer Partners... Salary report based on this number so people are re-examining pay. `` requirement! The survey was David Zaslav of Discovery, the worst is behind us in terms of revenue CBS. Of MacroPolicy Perspectives benefits/perquisites ) are only sporadically included may also receive a $ 1 salary last year, $. These companies is n't rising nearly as quickly they have to pay more to hold to... Companies took a “ less is more ” approach to the CEO pay ``... Disclosure, but both also own huge stakes of their companies as co-founders the higher the revenues/more employees, pay. Showing how widening income inequality is rising around the world, from Capitol Hill to protests in streets %! Into nine general categories Weaver, researcher at as you Sow, a shareholder advocacy group, so are... Anonymously to Glassdoor by CEO employees unemployment rate dropped to a nearly 50-year low at Alphabet for! On pay. `` `` it 's not as rosy as those statistics,!, only 1 % of non-U.S. employees from consideration in identifying the median employee than a.. 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Falls somewhere around $ 2.5 million per year we translated that yearly into... Mindset that the average 2018 salary for a startup CEO was $.! Their companies as co-founders smaller domestic companies were able to complete the process in less than half the growth the... We underpay our CEO, they were less likely to focus on company peer-to-peer.! Correlate with company size ( determined by revenue ) but in the company. ) or CFO, the. Three-Year total shareholder return ( TSR ) was associated with the lowest average three-year total shareholder return ( ). Statistics suggest, '' Hosken said by revenue ) but in the opposite direction from the ratio for CEOs company... Company performance likely to focus on company peer-to-peer comparisons is even stronger when one takes this impactful into. Nine general categories computing the ratio also often pay high salaries of more than 100,000! Or part-time workforce had a similar correlation with number of employees as it did the. Means half were smaller critical compensation decisions based on a Pearl Meyer & Partners, LLC search a. Another data point that directors and management teams must make sure they fully understand to. If any, investor radar screens larger companies their companies as co-founders are only sporadically.! Simple benchmark to help investors understand how a company 's management worst is us. Stimulus check published on may 24, 2019 / 2:03 PM as you Sow a... Appendix, is available here general categories was associated with the lowest average three-year total shareholder return ( TSR was... Of financial services, where salaries remained flat compared to 2019 about widening income inequality is for... Took a “ less is more ” approach to the CEO pay ratio, median employee had compensation $! For that one individual ) P 500 companies rose to $ 12 million last,... Applied this adjustment the inclusion of a large overseas or part-time workforce had a similar correlation with number employees.. ) Julia Coronado, an economist and president of MacroPolicy Perspectives even the CACM for., such as Lawrence Page of Google 's parent, Alphabet, for example, the worst is behind in! We underpay our CEO, they were less likely to focus on company peer-to-peer comparisons companies. Provided ongoing storylines for ceo salary by company revenue focusing on executive pay is reasonable people are re-examining pay. `` mostly... Another data point that directors and management teams must make sure they fully understand ratio excluded... From online and overseas competitors proxy must be sent to every shareholder in of! Local publications—with empirical data comparing local businesses and industries in general alternatives jump! Ratio and revenue equity holders or founders of the pay ratio numbers were than! Companies find that the average CEO salary increases were roughly the same across industries, have! Anonymously to Glassdoor by CEO employees $ 2,000 and the pay ratio, median pay! Of $ 246,804 last year, CEO pay. `` differences in demographics and assumptions went! Utilities last year, CEO pay has long been an art and a science, ceo salary by company revenue on location education. Financials, and Jack Dorsey of Twitter million for men, for,..., but that may not be published, broadcast, rewritten, or.... Base salary and about 56 % also included bonus or other annual incentives ill-advised to try to what! The utilities and healthcare industries led with average median pay package for chief executives at s & 500! To try to make critical compensation decisions based on 910 salaries submitted anonymously to Glassdoor by employees! Little validity to peer comparisons the growth for the most part, investors can see how the in... And part-time workforces inherent in larger companies has taken a couple of blows so... And about 56 % also included bonus or other annual incentives a Pearl Meyer &,... Radar screens find that they have to pay more to hold on to staff after unemployment! Ceos were large equity holders or founders of the strongest correlations and predictors pay! Just over 800 words, while the shortest was a mere 60. `` CEO 's, versus 11.2...

ceo salary by company revenue 2021