The U.S. Securities and Exchange Commission (SEC) has asked publicly
traded companies to explain executives’ compensation amounts. Since the 1990s,
CEO’s compensation in the U.S. has outpaced corporate profits, economic growth
and average workers’ compensation. By 2006, CEOs made 400 times more than
average workers’ wage – a gap that was 20 times more than in 1965. As a general
rule, the larger the company the larger the CEO’s compensation.
The authors, Phillipe Jacquart and J. Scott, found that “... higher pay
fails to promote better performance”. Another study by Prof. Lynne M. Andersson
and Prof. Thomas S. Bateman found that highly paid executives are more likely
to behave cynically and show tendencies of unethical performance.
More recent data suggests CEO’s pay to average workers’ pay ranges from
1,951 to 669 times (for ten companies) as shown below:
|
Company
|
Ratio
|
|
10. Starbucks
|
669:1
|
|
9. Gap
Inc.
|
705:1
|
|
8.
Macy’s
|
724:1
|
|
7. Bed
Bath & Beyond
|
734:1
|
|
6. CBS
|
862:1
|
|
5. Target
|
939:1
|
|
4. Walmart
|
1,133:1
|
|
3. CVS
Health
|
1,192:1
|
|
2.
Chipotle Mexican Grill
|
1,522:1
|
|
1.
Discovery Communications
|
1,951:1
|
Source: www.thestreet.com
In Malaysia, we have had some ruffled feathers on compensation received
by CEOs of GLCs or GLICs.
And so what’s a fair ratio between a CEO’s compensation and that of an
average worker? From a Christian business perspective, the ratio for a CEO in a
listed company or a major corporation is 20 times that of an average worker and
for an unlisted or smaller company it is
in the 8-10 times the ratio between the CEO and that of the average worker’s
salary. The jury is, of course, still out! But what do you think?
Reference
1. Jacquart,
Philippe, Armstrong, J. Scott, “Are Top Executives Paid Enough? An Evidence
Based Review”
2. Batemann,
Thomas, “Journal of Organizational Behaviour”
3. TheStreet, https://www.thestreet.com
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