At $240,430, Facebook had the highest-paid median employee of technology firms that had filed newly required data as of April 23.
Most of the attention that’s been paid to new rules requiring companies to publish a comparison between CEO and worker pay has focused on one number: The pay ratio. Headlines have zeroed in on high multiples — at Walmart, the CEO makes 1,188 times the median worker; at Mattel, the figure is 4,987 to 1 — or on the million-dollar paydays the CEO at the top of the org chart is getting.
But the most interesting number companies now have to disclose is one getting the least attention. Companies have had to publish their CEO’s compensation for years, and it won’t surprise many that a retail behemoth with a massive base of hourly workers — or a toy manufacturer where a majority of employees are based overseas, many of them working in factories making toys — would have an eye-popping ratio between the bottom and the top rungs.
Yet for the first time, companies are being forced to disclose how much they pay their median employee, offering a company-approved benchmark — albeit one that will tell many workers very little — about what employers are paying their workers. And now, with more than 70 percent of companies in the Standard & Poor’s 500-stock index having filed their data for 2017, we’re able to take a first look at which ones pay the highest median compensation for their workers. (The data, which includes the 350 companies in the S&P 500 that had filed their proxies as of April 23, was compiled by Proxy Insight, a corporate governance data firm.)
“These are the first officially sanctioned disclosed numbers on [median] employee compensation in U.S. history, and people are going to pay attention to it,” said David Wise, national practice leader for Korn Ferry Hay Group. While sites like Glassdoor or Payscale have long had employees report their pay — and there’s more transparency in some industries — figures directly from the company have been rare. “There’s an official-ness to this information that kind of pops you in the face and impacts how the market, customers, employees and the outside world views the company. That’s what I think no one really expected.”
The industries that dominate the top of such a list include biotech and health-care firms, technology, finance and real estate, and energy and utilities. Facebook had the highest-paid median employee of technology firms that had filed as of April 23, at $240,430, according to Proxy Insight. The median employee at Valero Energy made $192,837 in 2017. At the real estate investment trust Host Hotels & Resorts, one of the largest owners of luxury and upscale hotels, the median salary is $179,574. The highest median pay in the financial industry, according to Proxy Insight’s data, was at a reinsurance firm rather than a big Wall Street bank.
In addition to publishing the CEO pay ratio, the U.S. Securities and Exchange Commission’s rule requires companies to disclose the pay of the median employee used in the calculation — determined by statistical sampling or by listing the compensation in the middle after ranking all workers from highest to lowest paid (excluding the CEO) — but they can’t leave out part-timers, the majority of foreign workers or those who only have seasonal jobs. It’s important to note that the companies at the top of the list don’t necessarily have the highest paid employees on average — just who pays the highest at the median.
As a result, the numbers don’t tell most people looking to negotiate offers or compare potential jobs much at all. For one, you’d have to be vying for a job in that category – if the job in question is identifiable at all.
McDonald’s, for instance, listed the median worker who made $7,017 in 2017 as “a part-time restaurant crew employee located in Poland,” but whoever made $183,304 at Netflix in 2017 is only identified as the “median employee.”
While that may help fast-food workers in Poland, it tells those in other countries or those wanting to work at the restaurant giant’s corporate office absolutely nothing. A job candidate at Netflix has no idea if that median figure is for an accounting executive, a marketing vice president or an engineer with sought-after skills.
“I don’t think the information has a lot of utility for job seekers because there’s so much noise in what the number really represents,” Wise said. “For every company, it’s going to represent a different role or a different operating model or a different offshore population. It’s a blunt instrument.”
David Hofrichter, who specializes in executive compensation at the consulting firm Aon, says ratios that are calculated using workers’ median pay are shaped by five factors: The size of the workforce (bigger organizations will have more diverse job categories); its shape (flatter, less hierarchical workplaces tend to have lower ratios); its seasonality (how many are hired on a temporary basis); its geography (whether the firm has large populations of workers in low-paid countries); and its professional nature (how many workers are in high-skilled, high-demand roles rather than low-skilled jobs).
Many — though not all — companies near the top of the list tick one or several of those boxes. Industries like energy, utilities, real estate, finance and technology “tend to have high-skilled workforces, be more principally U.S. based and don’t have a lot of part-time or seasonal workers,” he said. “If you and I have an idea for a new biotech product and we get some investors behind us, we’ll hire a bunch of scientists and doctors, who more than offset a few clerical people.”
Still, pay experts say they believe some employees will use the figures as a comparison tool, whether among one another or when looking for new jobs. One of the issues that has human resources executives concerned is what to say to workers who think they’re worth more and suddenly discover they’re paid less than the median.
“Companies are freaked out,” Wise said. “It’s not a topic anyone wants to talk about, and there’s no upside for any company in over-explaining it. They’re hoping people see the numbers for what they are, which is in essence a mathematical calculation and not a commentary for how they manage compensation.”
Some people, he said, particularly at smaller companies with more homogeneity in the types of jobs, will use the data as yet another data point: “The benchmark may not be relevant at all to their role, but if the number is out there, it’s hard to not pay attention to it. Does it really buy you anything? Not really. But it doesn’t mean it won’t psychologically make you think about your own compensation opportunity.”