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The Insanity Of CEO Paychecks, Visualized

Just bonkers: based on the ideal salary gap, the average American worker should make $1.8 million a year to justify CEO pay.

Just about everyone on the planet agrees that CEOs earn too much. Except CEOs. But how much is too much? Let’s put it this way: the average American worker would earn almost $2 million a year if he were paid a fair salary based on the compensation of U.S. CEOs.

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That’s just one of the many details to emerge from a fascinating post over at the Harvard Business Review, visualizing the pay-gap ratio between chief executives and average workers internationally.

See the full series of charts herevia Harvard Business Review

But how do you define fair? You ask people and form a consensus. In 2012, the International Social Survey Programme quizzed people in countries all around the world, asking them two questions: what they thought the pay gap between a CEO and an average worker was, and what they thought it should be.

As it turns out, everyone agrees that CEOs deserve to make more than your average workers. Some countries think CEOs shouldn’t make that much more, though; Denmark, for example, believes the ideal pay gap ratio between a CEO and an average worker should be just 2:1. Other countries think that CEOs should be paid a lot more: Taiwan, for example, endorses an ideal CEO pay gap ratio of 20:1.

What is true universally though is that CEOs are making a lot more than what people deem fair. In the United States, the average American CEO makes a whopping 354 times the salary of the average worker. But ask Americans what a fair salary for a CEO is, and the consensus is just 6.7 times the salary of an average worker.

See the full series of charts herevia Harvard Business Review

That means that if the average American were paid the “ideal” fraction of the average CEO’s actual salary, he would rake in $1.8 million a year.

In 1984, legendary management guru Peter Drucker argued that paying any CEO more than 20 times the wages of the average American worker was anathema to the well-being of corporations. Pay your CEO more than that, Drucker argued, and all you did was increase employee resentment, decrease morale, and reward greed over responsibility. If Drucker could see the size of the paychecks of today’s CEOs, he’d be spinning in his grave.

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Check out more of the Harvard Business Review’s charts here

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