Pay Gap Between CEOs and Workers Jumped in 2021 at Low-Wage Companies

June 8, 2022 by Simon Jessop

The pay gap between workers and CEOs at 300 publicly listed U.S. companies with the lowest median wage jumped in 2021, a study from the Institute for Policy Studies (IPS) showed on Tuesday.

The average gap was 670 to 1, up from 604 to 1 the prior year, while 49 companies had ratios above 1,000 to 1, the study showed. Average CEO pay in the group climbed $2.5 million to $10.6 million, while median worker pay rose $3,556 to $23,968.

The findings will give new ammunition to investors who push for social justice causes as part of their environmental, social and governance (ESG) agenda.

U.S. corporations face an unprecedented wave of ESG-related shareholder resolutions this year, with the treatment of workers being one of the issues raised frequently.

“During the pandemic, low-wage workers have demonstrated how essential they are to the functioning of our economy. With profits rising in 2021, corporations had an opportunity to make a big leap towards greater pay equity,” said Sarah Anderson, Global Economy Project Director at the IPS.

The study found that at 106 of the companies, median worker pay failed to keep pace with the 4.7 percent average U.S. inflation rate over the period. Of that group, 67 companies spent a combined $43.7 billion on share buybacks in the period, boosting CEOs’ stock-based pay.

In response, growing numbers of workers are taking matters into their own hands and looking to move jobs in the hunt for better pay, working conditions or work-life balance, a trend known as “The Great Resignation.”

A March global survey by consultants PwC found 1 in 5 workers was “extremely” or “very likely” to switch employers in the next 12 months.

The COVID-19 pandemic has led to increased attention by investors on the way companies treat their staff, although, as was seen at Amazon’s recent annual meeting, many have balked at opposing management on such issues.