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CEO Employee Pay Ratio Methodology

Notes and Overview:

Data on CEO Salary was obtained from Forbes feature on CEO Compensation, 2012, available here. We summed Salary, Bonus, and Other compensation to get non-stock compensation. This measure is most similar to employee data from the PayScale website.

Data on Company revenue and profits was obtained from the 2012 Fortune 500 list, available here.

The list includes the largest 100 companies as ranked by Fortune for which current CEO compensation data was available. We excluded CEO’s who had not yet served in their position for a year, as Forbes data indicated it may be for another office. In other cases, CEO data was not available even though they had served for at least a year. Thus our list of 100 goes through the top Fortune 113 companies.

U.S. Only: All reports are for employees who work in the United States. This sample does not include U.S. territories, such as Puerto Rico or Guam.

Definitions:

  • CEO Annual Cash Compensation:  The sum of Salary, Bonus, and Other compensation, as reported by Forbes. This measure is most similar to employee data from the PayScale website. This measure was chosen as most similar to PayScale’s measure of compensation (TCC).
  • Fortune Company Rank: This is the rank of the company in 2012’s Fortune 500 list.
  • Total Cash Compensation (TCC): TCC combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings, as applicable. It does not include equity (stock) compensation, cash value of retirement benefits, or value of other non-cash benefits (e.g., healthcare).
  • % High Job Sat: This is the percentage of people who responded Extremely Satisfied or Fairly Satisfied to the question, “How satisfied are you in your job?”
  • Median Annual Employee Pay: This is the median (50th Percentile) pay (or Total Cash Compensation) for people who work at the given company. Half of the employees will earn more than this amount, while half will earn less.
  • CEO / Employee Pay Ratio: This is CEO divided by median worker pay for a given company.
  • %  Company Pays Compared to Market: This measures whether a given employer typically pays above, below or at market price for their employees.  By utilizing PayScale’s database of over 35 million employee profiles, we have determined  how various compensable factors, like work experience, education, and job responsibilities, affect pay, all else equal.  From this analysis, PayScale can then calculate what a worker with a given set of compensable factors will earn across different employers. This measure is reported as a percentage premium or loss. Any employer that pays above market will have a positive percentage. The larger the percentage, the higher the premium these employers pay for their workers. On the other hand, if an employer pays below market, the percentage will be negative.