Most Americans Clueless about Gap between CEO Pay and Employee Pay

Sunday, September 28, 2014
Graphic: Steve Straehley, AllGov

Most Americans have no idea how much more a corporate CEO makes than the average worker does, but it’s way more than they think it should be.

People around the world were surveyed on what they thought the gap between worker and CEO pay was, and what they thought the gap should be. Americans responded in 2012 that they thought bosses made 30 times what the average worker made, and that the ratio should ideally be 7 to 1. The actual ratio of CEO to worker pay was 354 to 1. Those of other nationalities had similar gaps between their ideal ratio and the ratio they thought existed.  

“The consensus that income gaps between skilled and unskilled workers should be smaller holds in all subgroups of respondents regardless of their age, education, socioeconomic status, political affiliation and opinions on inequality and pay,” Sorapop Kiatpongsan and Michael Norton wrote in their report (pdf). “As a result, they suggest that – in contrast to a belief that only the poor and members of left-wing political parties desire greater income equality – people all over the world, and from all walks of life, would prefer smaller pay gaps between the rich and poor.”

The United States had the highest ratio between the ideal and actual pay at 53 to 1. Spain’s ratio was 30 to 1, the Czech Republic’s was 26 to 1 and Germany’s was 23 to 1.

 “My coauthor and I were most surprised by the extraordinary consensus across the many different countries in the survey,” Norton said. “Despite enormous differences in culture, income, religion and other factors, respondents in every country surveyed showed a universal desire for smaller gaps in pay between the rich and poor than the current level in their countries.”

Some argue that the huge gap between CEO and worker pay began about 30 years ago when corporate bosses, such as Ted Turner and General Electric’s Jack Welch began to be known among the general public as “Great Men” and their compensation increased proportionally. “Such lionization is misplaced,” Harvard Business School historian and corporate board member Nancy F. Koehn wrote in The Washington Post. “Operating a sustainable enterprise, as any executive, manager or employee knows well, is inherently a team sport.”

-Steve Straehley


To Learn More:

CEOs Get Paid Too Much, According to Pretty Much Everyone in the World (by Gretchen Gavett, Harvard Business Publishing)

How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay (by Sorapop Kiatpongsan and Michael I. Norton, Harvard Business School) (pdf)

Great Men, Great Pay? Why CEO Compensation is Sky High (by Nancy F. Koehn, Washington Post)

Income Gulf between CEOs and Workers 11 Times Greater than in 1965 (by Matt Bewig, AllGov)

25 Major Companies Paid More to CEOs than They Did in Taxes (by Noel Brinkerhoff and David Wallechinsky, AllGov)


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