CEO Pay in Perspective

CAHIER SCIENTIFIQUE, 2019

52 Pages Posted: 14 May 2021

See all articles by Marcel Boyer

Marcel Boyer

CIRANO, Université de Monréal

Date Written: December 16, 2019

Abstract

The CEO pay ratio, measured as the ratio of CEO pay over the median salary of a firm’s employees, is the most often quoted number in the popular press. This ratio has reached 281 this last year for S&P500 firms, the largest US firms by capitalization (as of November 21 2019). But the B-ratio I proposed here, measured as the CEO pay over the total payroll of the firm, relates CEO pay to the salary of each employee and may be the most relevant and informative figure on CEO pay as perceived by the firm’s employees themselves. How much a typical employee of the S&P500 firms implicitly “contributes” to the salary of his/her CEO? An amount of $273 on average or 0.5% of one’s salary, that is, one half of one percent on an individual salary basis. To assess whether such a contribution is worthwhile, one must determine the value of the CEO for the organization and its workers and stakeholders. The Appendix provides the data for all 500 firms regrouped in 10 industries (Bloomberg classification).

Keywords: CEO Pay Ratio, B-Ratio, S&P500, Bloomberg, Real Options

Suggested Citation

Boyer, Marcel, CEO Pay in Perspective (December 16, 2019). CAHIER SCIENTIFIQUE, 2019, Available at SSRN: https://ssrn.com/abstract=3844149

Marcel Boyer (Contact Author)

CIRANO, Université de Monréal ( email )

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HOME PAGE: http://www.cirano.qc.ca/~boyerm

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