According to the democrat US Senator Robert Menendez, the huge difference between the CEO to average worker payout was partially responsible for fuelling the financial collapse. Some of the business people were opposed to the idea of openly publishing the ratios of salaries and perks for investors etc. However, it was more to do with CEO lobbying groups, which didn’t want this critical information to be made public. Unbelievably high CEO to average worker payout ratios AFL-CIO did a study, but they didn’t include employee benefits in their data, so the ratio calculated was a huge 357. However, it’s evident that average workers also earn regular incentives and other performance related incentives. Bloomberg News included that in their survey. The result was a far moderate a ratio of 204. However, when it comes to Standard & Poor’s 500 companies, the top 100 companies surveyed had a CEO to average non-supervisory worker payout ratio as a whopping 495. Research companies accused of presenting exaggerated data One more reason that real pay ratios are quite different from the industry-wide average is the fact that the denominators used are not standard. Some of the research companies, which have come out with a higher ratio were actually hugely criticized for using flawed and outdated methodologies, which was insulting to the average employees of some companies. For example, CEO David Simon of Simon Property was reported at no.3 with the CEO to worker payout ratio of 1594, in the Bloomberg list. It was termed as completely misleading and inaccurately portraying the CEOs paychecks. Some sane voices against the huge gap of payouts The security and exchange commission in the US, SEC, has however made it mandatory to disclose the CEO to average worker salary ratio for the companies with stock listings. Peter Drucker, a prominent management theorist suggests that the standard and appropriate CEO to average worker payout ratio should be 25 to 1. In his view, anything which is beyond it is discriminatory and not good for business. It discourages team spirit as the people think that the “king” will take all. The people on the plant floor or workshops may think that their top bosses are crooks. It makes the lower rank employees incredibly disillusioned. The incredibly high CEO payout figures According to AFL-CIO, the CEOs of the largest corporations in the US received $12 million as average payout in 2012, which was 350 times more than an average worker earns in those corporations. According to a trade-union estimate, the average American worker earned $35,000 that year. The payouts of top three CEOs in Fortune 500 companies were as follows: Larry Ellison ($95 million, Oracle Corp) Brett Roberts ($55 million, Credit Acceptance Corp) David Zaslav ($50 million, Discovery Communications) A discrimination that is an eye-opener for the government The ratio was highest in the year 2000, when the ratio was reported to be 525 times, which was just 80 times way back in the 80s. The consulting company AFL-CIO president, Richard Trumka, said that the government should realize that the average worker in the US is struggling to meet both ends meet. These companies are trying to eat into their healthcare benefits and their payouts are stagnant for many years; which is causing widespread anger. Confrontation at the Wall Street and SEC Therefore, the trade unions are also pushing for the Wall Street reforms aimed at making the publicly traded companies disclose their CEO to average worker payout ratio. The SEC has been under tremendous pressure from the lobbying companies and therefore the Commission has always resisted and delayed any such rule to be implemented. In the meantime, the trade unions have launched a website and they have updated the annual paychecks of the top-bosses of the 350 publicly traded companies to inform the general public. An attempt to break the deadlock The person who has brought this discrimination to light is AFL-CIO president, Richard Trumka, who is an example in the case. He earns just 9 times more than an average employee in his company. The CEO lobbying group however refrained from any comment in this regard. Tita Freeman, spokeswoman of the group The Business Roundtable, however added that the CEOs in that group were agreed to link the payouts with individual performance.
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