Chief executive officers in the U.S. are paid much better than their peers abroad, and the gap between their compensation and that of average American workers is wider than in other countries.
Chief executive officers in the U.S. are paid much better than their peers abroad, and the gap between their compensation and that of average American workers is wider than in other countries. CEOs of the biggest publicly traded U.S. companies averaged $14.3 million in annual pay, more than double that of their Canadian counterparts and 10 times greater than those in India, according to a Bloomberg analysis that used benchmark stock indexes in 22 nations. CEOs of companies listed in India’s Sensex Index still earn 229 times more than the average worker there, the second-biggest gap worldwide after the U.S.’s ratio of 265, according to a separate Bloomberg ranking. Norway and Austria have among the smallest margins. CEOs of companies in the Norwegian OBX Index got on average $1.28 million, roughly equal to the income generated by 20 people. A company listed on a U.S. exchange must disclose the ratio between a CEO’s compensation and the pay of its median worker for any fiscal year starting on or after Jan. 1, 2017. Peter Simon, a German lawmaker in the European Parliament, proposed a similar ratio for banks, aiming to bring executive pay to a “more appropriate level.”
There are myriad reasons for compensation discrepancies between executives. The U.S. is home to several of the world’s largest corporations, which tend to pay more. Cost of living is often higher in North America and Western Europe than some parts of Asia. And even the mere disclosure of detailed figures can push pay higher as boards set CEOs’ compensation in line with their peers, said Tim Quigley, associate professor of management at the University of Georgia. Bloomberg’s ranking of CEO pay against earnings across society bases income generated per person on gross domestic product per capita, adjusted for price-level differences between countries. It’s not a perfect measure: GDP measures just the value of goods and services produced, not how they were distributed.
Each country’s compensation figure is based on the average CEO pay package for companies in one major stock index, weighted by market capitalization. The pay, disclosed in public filings, includes salary, bonuses, perquisites and non-cash pay such as equity awards, deferred-compensation programs and pensions. Markets with pay data from fewer than 100 public companies or less than 50 percent of the benchmark index members were excluded.