CEO-worker pay gaps make no sense for Wall Street banks
The US Securities and Exchange Commission this week adopted a new rule requiring public companies to disclose how much money CEOs earn in comparison to typical employees. Part of the Dodd-Frank financial reform act, the rule has been applauded by many. The Times said the requirement could help shareholders make decisions on company performance based on things like morale and turnover.
But when it comes to Wall Street firms - which the rule was presumably designed for, since Dodd-Frank is a Wall Street reform law - it may not show a great deal. The pay gap rule has already received criticism for a number of reasons. For example, it requires companies to compare chief executive pay with the median employee compensation, rather than the mean.
Companies will be allowed to choose their own methodology for identifying the median employee, including using samples of the employee population rather than the full body. The concern, as voiced by Fortune's S. Kumar, is that companies could throw in a few higher-paid employees and exclude some lower-level workers when calculating the median. That would ultimately reduce the wage gap.
But even if the SEC had required companies to take the average pay of all employees, it would still be hard to glean anything from the results - especially for Wall Street firms with sizable investment banking arms.
We calculated the pay gaps for six of the biggest banks, based on average employee pay. To do that, we looked at 2014 CEO compensation data from proxy statements, total employee compensation in 2014 from balance sheets in quarterly and annual reports, and the total number of employees at each bank.
Here's what those pay ratios look like: