feCEOs Of Chipotle, CVS, Discovery, Walmart Make The Most Compared To Employees’ Wages

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(Adam Fagen)

Earlier this month, the Securities and Exchange Commission finalized a long-delayed rule that will require many businesses to publicly disclose the ratio of their top executive’s pay to the earnings of the typical employee. If the data in a newly released report is accurate, then the CEOs of Chipotle, CVS, Walmart, and Discovery Communications are each making more than 1,000 times the average salary of the people they employ.

This is according to research from Glassdoor.com, which ranked companies according to Glassdoor’s calculated ratio of CEO earnings to average employee pay.

The company with the highest ratio was Discovery Communications, whose CEO David Zaslav brought in $156 million, nearly 2,000 times that of the $80,000 average pay for Discovery employees. Interestingly, Discovery also had the highest pay of the 10 companies with the highest CEO:Worker pay ratio.

In fact, most of the companies with the highest ratios have employees with average earnings below $30,000, which means the CEO’s compensation doesn’t need to be astronomical for the pay ratio to be large.

For example, Glassdoor says the Chipotle CEO Steve Ells earned $28.9 million last year. That’s less than 1/5 the size the pay of Discovery’s Zaslav, but since — according to the report — the average Chipotle worker earned $19,000 (the least among all the top companies in the study), the pay ratio of 1,522:1 is the second-largest in the report.

Filling out the top positions were CVS (#3; 1,192:1), Walmart (#4, 1,192:1) and Target (#5, 939:1). Aside from Discovery, Target had the highest average salary ($30,000) in the top five.

Likewise, both the Gap and Macy’s have average worker pay of $22,800 and the CEOs of both companies earned around $16 million last year. That’s not even in the top 25 for CEO pay, but because the average pay is so low, the resulting ratios are high enough to put Macy’s (724:1) and Gap (705:1) in the eighth and ninth spots, respectively.

Some companies have high average pay but are also led by CEOs making big bucks. Like Microsoft, where Glassdoor says the average pay is $137,000, but where CEO Satya Nadella pulls down $84 million a year. Or Oracle, where CEO Larry Ellison makes $67.2 million, equal to 573 times the average pay of $117,000.

The recently finalized SEC rule, mandated by Section 953(b) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, doesn’t prescribe a specific format for companies to calculate the CEO-worker pay ratio. Rather, the SEC has is giving employers the ability to use any “reasonable method” that “works best for their own facts and circumstances.”

Thus, a company with many thousands of employees spread around the nation can use sampling and estimates to calculate its ratio. However, businesses must describe and detail their methodologies for obtaining their final figures.

Additionally, rather than requiring companies to run the numbers every year, they will only be made to disclose the ratio every three years — except in cases where there have been significant changes to employee numbers or pay structure.

One area in which the final rule is not giving flexibility to companies is the definition of “employee.” Rather than simply calculating full-time workers, the ratio must also include part-time and seasonal staff, which will have a significant impact on foodservice and retail companies that employ large numbers of short-term workers during certain times of year.

by Chris Morran via Consumerist