I already knew that “Female CEOs remain scarce at the biggest publicly traded companies” and I guessed that they would be underpaid relative to male CEOs. Bad guess on my part because “those who hold the top job receive pay competitive with male peers.”
Women make up only 5 percent of the CEO ranks at S&P 500 companies. Yet median compensation for a female CEO was valued at $13.5 million for the 2017 fiscal year, versus $11.5 million for their male counterparts, according to an analysis by executive data firm Equilar done for The Associated Press.
The Equilar analyses were reported in two articles in the AZ Daily Star (tucson.com) (h/t Dean Chaussee).
Women CEOs still a rarity, but pay tops that of men breaks down compensation by gender and For CEOs, $11.7 million a year is just middle of the pack compares CEO pay with that of the average worker in S&P 500 companies.
Two issues highlighted by these reports are worth exploring. First, there is the question of why female CEOs are still so rare.
“The inability to push seasoned females up the ranks is tragic in my mind,” said Josh Crist, managing director at executive search firm Crist Kolder Associates.
A Pew Research Center study found that women held only about 10 percent of top executive positions at publicly traded companies in the much larger Standard & Poor’s Composite 1500. Of that group, the women tended to be in finance or legal positions that research shows are less likely to lead to the CEO office.
Companies are seeking diversity, both in gender and ethnicity, for their leadership, Crist said. But getting diverse talent at the top takes time because of the change needed throughout the organization.
Part of the problem is that big companies can be slow-moving, said Drew Silver, a researcher at Pew. The female CEOs in charge now have been in their careers for 20 or 30 years, so their rise reflects the corporate culture of the 1980s. He worries real change will take years.
Brande Stellings, senior vice president of advisory services at Catalyst disagrees. She said companies that make the decision to change have been able to do so quickly.
“The differentiator is not generation or time, but it’s how much does it matter to the leader or organization,” she said. “When someone asks to make the business case for diversity, that case is out of the gate. They are more into the how.”
The second issue revealed in the Equilar study is the magnitude of CEO pay. The numbers, compared to those of the average worker, are staggering, mind-blowing, and just plain obscene.
Chief executives at the biggest public companies got an 8.5 percent raise last year, bringing the median pay package for CEOs to $11.7 million. Across the S&P 500, compensation for CEOs is often hundreds of times higher than typical workers.
The pay increase matches the bump that CEOs received in 2016, according to salary, stock and other compensation data analyzed by Equilar for The Associated Press.
For the first time, the government required companies to show in their annual proxy statements just how much more bosses make than the typical employee. The typical CEO made 164 times the median pay of their employees, according to Equilar’s analysis.
The NY Times explored this ratio of CEO to worker pay in Want to Make Money Like a C.E.O.? Work for 275 Years. Let’s follow the Times and express the ratio as the number of years an employee would need to work in order to earn the same amount of money as the CEO does in just one year.
Time Warner: 651 years. Walmart: over 1000 years. Live Nation Entertainment, the concert and ticketing company: 2893 years. Mattel, the toy company: 4987 years.
"It’s grotesque how unequal this has become,” said Louis Hyman, a business historian at Cornell University. “For C.E.O.s, it’s like they are winning the lottery year after year. For a lot of Americans, they don’t have any savings. When they lose their job, they lose everything.”
… critics of rising income inequality are quick to point out that sustained low wages can lead to reduced economic growth and marginalize large swaths of the population. Disposable income is needed for a healthy economy, and people need the time and resources to take care of themselves and their families.
"Particularly in low-wage jobs, people are struggling to pay for housing, for health insurance, for child care,” said Jennifer Gordon, a law professor at Fordham University. “When people are working two and three jobs and are not able to put together a decent wage, then at a very basic level they don’t have time to be active in their children’s schools, they don’t have the ability to engage in their local politics.”
And still, executive pay, already excessive in the eyes of many critics, rises.
Among the 160 companies of that group that revealed pay ratios, the median compensation for chief executives was also $17.5 million. In contrast, workers earned $75,217, a decent salary in a country with a shrinking middle class, but one that further demonstrates the growing gap between the C-suite and the typical employee. Equilar calculated that the median pay ratio disclosed by these companies was 275 to 1.
But the upward trend in CEO pay is insidious.
In 2017, the median pay for the 200 highest-paid chief executives was $17.5 million, and they received an average raise of 14 percent, compared with 9 percent in 2016 and 5 percent the year before that.
So, in terms of the 2014 CEO dollar, these large percentage raises compound, 1.05 x 1.09 x 1.14 = 1.305, that is, a 30% increase in just the most recent three years alone.
"The top layer of management live like kings and queens while the people at the bottom are scrabbling for a decent existence,” Ms. Gordon said. “We should not have that in a society where equality and fairness supposedly matter.”
But we have it.
As the level of income inequality creeps upward, year after year, we are reminded of the case of the frog that becomes accustomed to the rising temperature in its pot of water and eventually boils to death.
Or, perhaps “the top layer of management” who “live like [mostly] kings and [a few] queens” would say of their workers “scrabbling for a decent existence”, Let them eat cake.