Widening gap between CEO compensation and worker income

THE GAP BETWEEN CEO compensation and worker income is widening, according to University of Otago research.

University of Otago Business School accountancy and finance researcher Dr Helen Roberts’ longitudinal study shows New Zealand CEO compensation is increasing in real terms - almost five times faster than worker income in New Zealand.

A media release says that in real terms, mean total CEO compensation is up 114 percent in 17 years, while mean real worker income is up 26 percent, confirming there is a widening gap between the CEO’s income and that of their workers.

CEO’s are now paid 30 to 50 times more than the average wage; the average New Zealand salary is $60,000. The annual median waged income now is $44,886, compared to $29,897 in 1997 (from the 2013 NZ Income Survey).

The ever-widening pay ratio is an international trend – the CEO pay ratio in the United States for instance is typically between 300 and 500, but in some cases exceeds 1000 times that of the average wage.

Roberts has also tracked the economic performance of the CEO’s company alongside remuneration, to give an objective overview of the link between CEO performance bonuses and company’s annual results.

“This clearly demonstrates an overall trend of marked growth over time which is not on the same trajectory as the economic ups and downs of publicly listed companies in New Zealand, nor worker salaries.”

Income fluctuates from one year to the next but while some downturns, like the Global Financial Crisis, for example, dampened the increases, they still rose.

“It is therefore somewhat misleading to say that CEO salaries are a barometer for the rises and falls in fortune of the business world and of New Zealand’s economy. While the rise is often attributed to incentives paid in a buoyant market, this is a simplistic interpretation,” she says.