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Does CEO-to-worker pay ratio matter?

SmartPulse — our weekly nonscientific reader poll in SmartBrief on Sustainability — tracks feedback from more than 17,000 CSR leaders. We run the poll question each Wednesday in our e-newsletter. This week’s analysis is provided by Elaine Cohen, a CSR expert at Beyond Business.

Last week, we asked: What is a reasonable ratio between CEO salary and average employee salary?

  • The CEO should earn no more than 100 times the average employee salary, 51.72%
  • This is not relevant as long as employees earn a living wage, 21.84%
  • This is not relevant — the CEO deserves to earn as much as the market will pay, 18.39%
  • The CEO should earn no more than 200 times the average employee salary, 4.6%
  • The CEO should earn no more than 400 times the average employee salary, 3.45%

It matters. In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the average CEO pay in S&P 500 companies was $11,358,445. CEO pay was 336 times more than the average employee. Paul R. Herman — the HIP Investor — says that lower CEO-to-worker pay ratio fosters higher employee dedication and productivity. Some say that if an organization has ethical issues, they can be revealed by their executive compensation plan. Forty percent of survey respondents believe that free market dynamics should apply and that CEO’s should take what they can get. The question is whether that’s truly a sustainable approach.