Thanks to an SEC ruling, US companies are now required to list the pay ratio between its CEO and its median salary. The results make for interesting reading.

By Daniel Herborn

Posted on June 29, 2018

Cost information website has crunched the numbers and found that Berskhire Hathaway has the lowest ratio between CEO and median pay. Warren Buffett is CEO of the conglomerate and makes a salary of US $100,000, roughly twice as much as the median salary of US$54,000. He earns no bonus or other compensation and his salary has remained the same for decades.

Buffett’s relatively low salary belies his extraordinary wealth which is overwhelmingly generated by the 283,000 shares of Class A Berkshire Hathaway stock he holds. He remains in third place on Forbes’ real time list of The World’s Billionaires with a net worth of US$81.4 billion.

Kinder Morgan was in second place on the list. Its CEO, Steven Kean, makes US$382,000, approximately four times as much as the company’s median salary of US$104,000.

Another high-profile company to rank highly on the list was Facebook, which was in ninth place. CEO Mark Zuckerberg has a salary of US$8.9 million, equivalent to 37 times the company’s median salary.

The UK is also about to introduce draft legislation which would require large companies to explain the gap between CEO salary and average pay. The legislation would take effect from 2020.

What the data shows

The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) has said the disclosure is important as it “shows which companies are investing in their workforce to create high-wage jobs.”

The AFL-CIO runs the Executive Paywatch website and has reported the average CEO of an S&P 500 Index company earned US$13.94 million in 2017. This equates to 361 times the salary of an average rank-and-file worker.

There are some anomalies with the data as some companies include the salaries of higher-paid contractors or employees of subsidiaries. Freight transportation company CSX Corporation appeared in fourth place on the list based on the salary of E. Hunter Harrison, its previous CEO. Harrison died in late 2017 and was replaced by James Foote, who earns a higher salary.

Another recent study by consulting firm Pay Governance found that a number of factors went into the pay ratios, including the circumstances of the industry labour market, the percentage of offshore employee populations, the presence of large numbers of retail/part-time employees and differing employment strategies. These variables  meant that pay ratios could not be easily compared across industries.

The original SEC interpretive guidance on the disclosure of CEO pay ratios noted the information was intended to allow shareholders to understand and assess the pay ratios within a company rather than to facilitate comparison of information between different companies.

The companies with the lowest CEO to median salary pay ratios

Company CEO CEO salary (US$) median salary (US$) ratio
Berkshire Hathaway Warren Buffett 100,000 54,000 2:1
Kinder Morgan Steven Kean 382,000 104,000 4:1
J.B Hunt Transport Services John Roberts 859,000 57,000 15:1
CSX Corporation E. Hunter Harrison 151 million 99,000 27:1 Marc Benioff 4.7 million 155,000 30:1