February 25, 2020
Equilar Analyzes Pay Ratio Data by Sector
– Lynn Jokela
A recent Equilar blog analyzes CEO pay ratios by industry sector. The data is interesting to review but as the blog points out, the usefulness of pay ratio data is questionable since there’s difficulty comparing pay ratios across sectors due to some companies employing more part-time workers and differing employment practices and labor needs. Equilar found sectors with the highest pay ratios included services, consumer goods and health care – noting that both the services and consumer goods sectors employ high numbers of part-time workers.
The blog also includes “extreme” pay ratios and notes the difficulty comparing CEO and worker pay. Here’s an excerpt:
SEC disclosure requirements for calculating pay ratios create concerns about the usefulness of the metric. For example, Tesla CEO Elon Musk’s pay will only become realizable if the company clears very high performance targets. Regardless, the entire pay package must be used in the pay ratio calculation. This can cause extreme ratios that may not accurately reflect realized CEO compensation in a given year.