The leader of a company is expected to make considerably more than the average employee, but at what point, if any, does the discrepancy become unethical?
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The ratio between CEO salary and the average employee salary at a company has steadily increased the last 20 years. In 1993, the ratio was 195:1 and in 2012 it was 354:1, according to an Institute for Policy Studies report.
In what appears to be an effort to shame CEOs to lower their pay, the Securities and Exchange Commission proposed Wednesday to make it mandatory for public companies to disclose the annual CEO salary compared to the median employee’s compensation at their company.
The question is will the proposed ratio rule lower CEO pay or increase employees salaries? Some are highly skeptical.
“Everybody knows that CEOs make way more than workers. That’s the point of being a CEO. And in general, they simply don’t care,” writes Daniel Gross in The Daily Beast. “If they did care about the disparities between top earners and their workers, they’d do something about it—like raise wages. But they haven’t.”
Others would like the SEC and policy makers to go a step further, and make a maximum ratio rule for CEO salary. For example, Gawker writer Hamilton Noaln believes a CEO’s salary should be no more than 100 times of that of the average employee’s salary.
“Hell, this should be a generous enough ratio for many CEOs to make over $5 million, which is more money than anyone needs to make, anyhow,” Nolan writes. “A ratio of 100-1 is close enough to the current (gross, exaggerated, plutocratic) ratio that it is achievable without anyone at the top being able to cry about it too much.”
Below is a PayScale Infographic showing the top and bottom five CEO to worker pay ratios.
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