CEO-to-Employee Pay Ratio Lower Than Expected: Mercer

The difference between CEO and average employee pay may be lower than expected, according to a recent survey.

Global consultant Mercer found that CEO-to-employee pay ratios are actually much lower than the 300:1 frequently publicized, coming in at less than 200:1 at the majority of companies surveyed.

Mercer surveyed 117 companies across 12 industries, finding that industries with more professional staff have lower ratios than industries with more part-time, temporary and less-skilled employees. The lowest ratios are in the banking/financial services and technology sectors, while the highest ratios are in retail/wholesale and consumer goods.

“While the ratio may still seem significant to some, it is not as high as many might think,” said Gregg Passin, senior partner and North America leader of Mercer’s Executive Rewards business. “Supporters of pay ratio disclosure that hope it will pressure companies to reduce CEO pay may be disappointed to learn that banking/financial services companies—often criticized for excessive pay—have lower ratios than most other industries.”

Mercer said it conducted the survey in anticipation of the SEC’s CEO pay ratio disclosure rule, which will require all public companies to disclose the ratio of the CEO’s total pay to the median total pay of all U.S. and non-U.S. employees, beginning in 2018.

Among key findings from the survey:

• 60 percent of respondents have estimated their ratio, with more than half reporting ratios under 200:1 and only 20 percent reporting ratios of more than 400:1.
• Approximately one-third (32 percent) are considering statistical sampling as a method to identify the median employee.
• More than 80 percent of companies report their data systems are ready to identify the median employee.

Mercer is a wholly owned subsidiary of Marsh & McLennan Cos.

Source: Mercer