Well, of course, a CEO's pay is indicative of what board considers as the CEO's contribution towards the bottomline/topline vs the contribution of all employees and when a CEO's pay is so much higher than that of other employees, it is in a sense, a statement that devalues the contribution of other employees.
Given that most boards are full of top-tier executives from other organizations, clearly it is in their narrow interests to favor high payouts to CEOs. But that is also indicative of a very high sense of entitlement and so the question is not - what should the ratio be? the question should really be - is the CEO really a team player? and does he/she value the team they have setup and if so how do they honour the team when the company does well and how will they as a team deal with a situation when there is a big downturn in the company?
I am not at all arguing for a socialist/communist type of mindset - but there is a point at which the sense of entitlement that CEOs feel that does damage to their own teams in ways that they don't realise. And I say this as someone who is a CEO.
How is that? The board sets the CEO salary, not the other employees.
is the CEO really a team player?
I'm confused. So if the CEO is a "team player" then it's ok if their pay is super high?
If you pay someone disproportionately higher than others in the same team, what message are you sending to others in the team? When a CEO goes with that decision, they are devaluing their own team
I worked for a large corporation and the CEO makes at least 100x what I do, but she is also running a company of 150,000 employees, so I don't feel devalued at all. I'm paid quite well.
It's not measuring CEO pay to median employee, it's "The CEOs at America’s largest low-wage employers". So they basically looked at the largest companies that paid the lowest wages.
CEO pay tends to align quite well with not just performance, but also company size. Would you expect a CEO of a low wage company that has revenues of $10B to be paid more than the CEO of a similar company with $100M in revenues? I would. Larger companies are more complex, the CEO is managing a lot more employees, the stakes are higher and you'd like hire a very different CEO for a $10B a year company versus a $100M a year company. Hence, you'd normally expect that larger companies would have a higher ratio of CEO to lowest paid employee.
That is likely one factor in why the US stands out compared to Europe. The country USA was compared to was Switzerland! A country that is 41x smaller than the US.
And look at the top Swiss companies by revenue [1]. They are commodity trading companies! They were likely entirely excluded from the analysis.
But the point stands - what is the right ratio? 100x? 50x? Should it be exactly the same for every company? Why link pay solely to the lowest employee wage and ignore all the other factors - size of the company, revenues, profits, median employee wages, wage distribution, etc?
[1] https://en.wikipedia.org/wiki/List_of_Swiss_companies_by_rev...