SmartPulse — our weekly nonscientific reader poll in SmartBrief on Sustainability — tracks feedback from more than 17,000 CSR leaders. We run the poll question each Wednesday in our e-newsletter. This week’s analysis is provided by Elaine Cohen, a CSR expert at Beyond Business.
Last week, we asked: What is a reasonable ratio between CEO salary and average employee salary?
- The CEO should earn no more than 100 times the average employee salary, 51.72%
- This is not relevant as long as employees earn a living wage, 21.84%
- This is not relevant — the CEO deserves to earn as much as the market will pay, 18.39%
- The CEO should earn no more than 200 times the average employee salary, 4.6%
- The CEO should earn no more than 400 times the average employee salary, 3.45%
It matters. In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the average CEO pay in S&P 500 companies was $11,358,445. CEO pay was 336 times more than the average employee. Paul R. Herman — the HIP Investor — says that lower CEO-to-worker pay ratio fosters higher employee dedication and productivity. Some say that if an organization has ethical issues, they can be revealed by their executive compensation plan. Forty percent of survey respondents believe that free market dynamics should apply and that CEO’s should take what they can get. The question is whether that’s truly a sustainable approach.
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All executive pay should require prior affirmative vote of a majority of shareholders, not wimpy ineffective advisory vote. If execs cannot make a case to convince shareholders of their value, they clearly don't deserve it. CEO and exec pay is outrageously high at many companies and dhareholders are getting fleeced.
[...] increased but the top earners are creaming the system more and more with every passing day. From SmartBlog In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the [...]
[...] SmartBlog In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the [...]
"Forty percent of survey respondents believe that free market dynamics should apply and that CEO’s should take what they can get." Why does 'free market' only apply to CEOs choices of what companies they join (or stay with) I believe CEO-to-worker ratio should be made widely available to the public at large. This will allow the consumer to decide which companies and brands to support, using the market to help curb inequality. Left unchecked and unnoticed, it’s natural for excesses to happen. Rather than the government trying to get into compensation fairness (which is subject to the whims of politics), let society determine what is ‘too much’ and vote with their wallets.
My first instinct is to love this idea of using pay ratio information in consumer decisions, but then I wonder if we will hit the right target when profits go down. You think it's more likely the CEO takes a pay cut or lays off workers?