The staggering divide between CEO and median worker salaries

In the USA, the Securities Exchange Commission regulation based on the Dodd-Frank Financial Reform Bill of 2010 has unleashed the cat among the pigeons and raised a major question mark on the staggering divide between CEO and median worker salaries

Publicly held companies must now disclose

a) The median of the annual total compensation of all its employees except the CEO

b) The annual total compensation of its CEO

c) The ratio of the two amounts.

Consequent to the rule, we came to know that Mattel, the Barbie doll manufacturer paid its CEO , 4,987 times as much as its median worker. So, not only is it one of the largest toy-making companies on earth, but also of the biggest manufacturers of income inequality, too

The CEOs of Abercrombie & Fitch,  McDonald’s, Manpower, Gap and Walmart make 3,431 times,  3,101 times, 2,483 times, 2,900 times and1,188 times the average worker.

As per the national average for the USA, CEOs make 361 times the average worker, meaning the average CEO makes in one day what the employee takes a full year to make.

Of course, the higher rewards comes with a more complex job description, rare to find talent & skill-sets and high risks

And yes, there are computational issues such as the utility of comparing the earnings of part-time and temporary workers, employed during peak season, by a retailer, without adjustment, to the compensation of full-time CEOs

But its an undisputed fact that when you are working hard and struggling to get by while your boss is being rewarded hundreds – or even thousands – of times more than you on payday, you will certainly feel shortchanged.

The fact remains , as also endorsed by studies conducted by HBS professors as well as CNBC, that this quantumn of disparity can be a big dampener when it comes to employee morale and lead to poor performance of the company

Everytime [CEOs] acquire more, it means someone else gets less.

Back home in India, we don\’t have any legislative requirements yet to uncover the magnitude of this inequality. But data seems to suggest that its equally steep

If we look at numbers, CEOs of  widely held, family owned, MNCs and PSUs drew home median salaries of INR 8.3 cr, 4.2 cr, 4.1 cr and 0.3 cr. The maximum salaries were 27.7 cr, 83.2 cr, 38.1 cr and 1.8 cr respectively

As per IiAS study on executive remuneration. The CEO Pay to median Employee Pay was 122 times and 88 times for BSE-30 and BSE-500 companies

Certainly concentration and hoarding of wealth by a few deep pocketed executives has it attendant \’trickle down of discontent\’ in society. Recent case in points are the violent protests in Sterlite Tuticorin  and the Gujarat lignite mining.

What do you think?

Is somewhere legislation needed ?

Is this fair? Unfair? What are the aspects we are missing in our discussion?

Would love to hear from you

Thanks & Regards!!