In July of 2023, right before the start of the actors’ strike and more than two months into the Hollywood writers’ strike, Disney CEO Bob Iger was attending investment firm Allen & Company’s annual Sun Valley Conference, an event known as “summer camp for billionaires.” It was there—the same day it was announced that his contract with Disney would be extended two years, the terms of which gave him the opportunity to receive an annual incentive bonus five times that of his base salary—that he called the writers’ and actors’ expectations for their contracts “not realistic.”
“I respect their right and their desire to get as much as they possibly can in compensation for their people. But you also have to be realistic about the business environment and what this business can deliver,” Iger said in an interview with CNBC. “It is and has been a great business for all of these people and it will continue to be even through disruptive times. But, being realistic is imperative here.”
Hollywood workers were quick to point out just how great a business it has been for Iger, specifically, as well as other studio executives. Iger’s November 2022 contract with Disney included a base salary of $1 million, the potential for a bonus equal to 100% of that salary, and $25 million in Disney equity, for a total of $27 million. “There he is sitting in his designer clothes, just got off his private jet at the billionaire’s camp, telling us we’re unrealistic, when he’s making $78,000 a day,” SAG-AFTRA President Fran Drescher said in a livestream with Senator Bernie Sanders days later.
Just 12.7% of SAG-AFTRA members make at least $26,470—the minimum annual take home to qualify for union health insurance. In 2022, the median worker at Disney made $54,256. That means Iger is earning 500 times the salary of his median worker.
This story is part of a special Fast Company report on CEO pay, including:
• A searchable list of the data for the CEO and employee pay rations of more than 2,000 companies
• A list of the 15 most fairly paid CEOs
• A list of the 15 least fairly paid CEOs
Iger is not alone. Across Hollywood studios—and across industries—CEOs are taking home compensation packages that are hundreds or thousands of times greater than their workers’ salaries. Different analyses yield varying CEO-to-worker pay ratios—one recent report put the median CEO-to-worker pay ratio of the S&P 500 at 324 to one.
That number in itself is shocking, but even more absurd ratios emerge looking at specific companies. Apple CEO Tim Cook pulled in more than $99 million in 2022, 1,117 times the company’s median worker pay of $84,493. Put another way, that means the typical Apple employee would have to work 1,117 years to make what Cook earns in one.
Though he earned less than Cook, Hertz CEO Stephen M. Scherr had one the most disparate ratios of U.S. public companies in 2022 according to data provided by Puerto Rico-based SEC compliance and disclosure intelligence company MyLogIQ (which is Fast Company’s partner on our CEO Fair Pay Report): $182,780,923 compared to $36,683, or a ratio of 4,983 to 1. Michael Rapino, the CEO of LiveNation, owner of TickerMaster—which has come under withering criticism for its handling of tickets to Taylor Swift’s summer tour—had a ratio that’s even more glaring: 5,414 to 1.
What is a CEO truly worth?
These numbers are almost too big to wrap our heads around. They also come with a heft that it can feel difficult to challenge: these executives must have created untold value for their companies to earn such figures, right? Maybe, you think, they deserve it for taking on more risks than the average worker, or for shouldering more stress.
Some CEOs have certainly taken significant risks, which speaks to the different kinds of CEOs that exist. You could argue that someone who founded a business may deserve a bigger stake of its success, while a CEO who was hired into the role is more like any other employee. (Non-founder CEOs may also be more judged by their annual performance than a founder.)
But the idea that handling most of the risk must equate to an immense salary falls flat when you look at other high risk jobs. “The Secretary of Defense is making life or death decisions on a daily basis, overseeing a massive number of staff, and yet pay for cabinet secretaries is just a tiny fraction of what pay is for CEOs, even at companies that are relying on government money,” says Sarah Anderson, who directs the Global Economy Project at the Institute for Policy Studies, a progressive think tank focused on equality.
That justification also fails to value other types of necessary work, and the risks everyday workers continuously take. “During the pandemic, we got a real eye-opener in how essential so many low-wage, front-line workers are to the running of our economy, and how much they were willing to take risks to keep food on the table and keep the economy running,” Anderson adds. “The bottom line is, every employee contributes to the profits of the company.”
Extreme gaps between a worker’s pay and an executive’s income have documented business impacts: poorer employee morale, reduced productivity, higher turnover rates. But even if you still think CEOs should take home many multiples of what their average worker makes, there can be broader drawbacks to outsized executive compensation. Most CEO pay packages aren’t only a salary, as Iger’s breakdown shows; they also include stock options and equity, and performance bonuses.
It seems as if, for the typical public company CEO, a lot of effort goes into negotiating massive, can’t-lose compensation packages, Anderson notes, with executives hiring “armies of people” to implement and administer their complex pay packages. It makes her wonder, she says, “Why is it that CEOs can’t get motivated to do a good job for an ordinary salary?”
And once in place, a CEO incentive plan with enormous upside potential often “encourages executives to take actions that might boost the size of their paycheck in the short term but could also pose real risk for the broader society,” says Anderson. She points to the 2008 financial crisis as an example, “when executives chasing huge bonuses drove our economy off a cliff.”
But it’s happened in other sectors, too: Executives have pushed opioid use, skimped on safety protections, and even expanded fossil fuel extraction while simultaneously pursuing massive run-ups in company stock prices, and their accompanying payouts. When CEOs are incentivized to think about their own bonuses at the expense of long-term consequences, extravagant executive pay isn’t just an issue for workers at that individual company, but for society at large.
Increasing salaries brings increasing scrutiny
CEO pay wasn’t always this outlandish. In 1965, the CEO-to-typical-worker pay ratio was just 20-to-1. In 1989, it was 58-to-1. That it’s increased by more than a factor of five in under 35 years is not a sign of how much more value executives are bringing to the table, but how much more unequal our society has become. In that same time period, from 1989 to 2019, the total wealth held by the top 10% of U.S. families grew from $24.3 trillion to $82.4 trillion, according to the Congressional Budget Office, an increase of 240%. Families in the bottom half of wealth distribution saw their worth increase just 65% in comparison, from $1.4 trillion to $2.3 trillion.
Scrutinizing CEO pay has become a crucial labor issue, a tool for workers to point out the inequality in their places of employment and the undervaluing of their own work. When the actors’ strike officially kicked off, Fran Dresher spoke at a press conference about how her union’s fight was bigger than Hollywood: “What happens here is important, because what’s happening to us is happening across all fields of labor,” she said. “When employers make Wall Street and greed their priority, and they forget about the essential contributors that make the machine run, we have a problem.”
More and more, the comparison of a CEO’s compensation to an average workers’ income has been brought up in union fights, highlighting how companies can clearly afford the wage increases or other benefits workers ask for. In 2022, Starbucks Workers United noted how the company paid former CEO Kevin Johnson $60 million to leave the company—an amount that it would take the average barista there 2,000 years to earn.
“Meanwhile,” the union posted on Twitter, “Starbucks says they can’t afford to give us sufficient hours and living wages.” As the United Auto Workers continue to negotiate with the Big Three car manufacturers, UAW President Shawn Fain has repeatedly called out the companies’ record profits, and record CEO compensation: “GM CEO Mary Barra made $29 million,” he said in a Facebook live. “A new worker at the Ultium battery plant (earning $16.50 an hour) would need to work 16 years to make one week of a CEO salary.”
It’s also become an issue for shareholders. In June, a month after nearly 12,000 film and TV writers went on strike, Netflix shareholders voted against compensation packages for the streaming company’s executives, at the urging of the writers’ union. “If the company could afford to spend $166 million on executive compensation last year, it can afford to pay the estimated $68 million per year that writers are asking for in contract improvements and put an end to the disruptive strike,” WGA West president Meredith Stiehm wrote in a letter to Netflix shareholders (though the majority had reportedly already voted to reject the pay packages before they even received that letter). Similarly, Starbucks shareholders objected to the company’s CEO compensation proposal in 2021, in what’s known as a “say on pay” vote. More recently, both Gap and Walgreens pushed out CEOs who had received criticism for their outlandish pay packages even as their companies’ financial performance was underwhelming.
This all points to the increased attention—and scrutiny—on CEO pay. That change is something Ganesh Rajappan, CEO of MyLogIQ, has noticed firsthand. For more than 20 years, MyLogIQ has collected disclosures from the Security and Exchanges Commission, using AI to analyze public companies’ financial filings. Whereas this information was once the interest of a small group of activists, he says, “now it has definitely taken a big turn.”
Part of that is thanks to regulations and transparency requirements: In 2015, the SEC adopted a rule requiring pay ratio disclosures, and that requirement didn’t go into effect until 2017. There have been other regulations, too: In 2022, the SEC amended its disclosure rules to require more information on executive pay and financial performance measures, so called “pay versus performance” disclosures. Also that year, the Commission adopted a rule requiring companies to “claw back,” or recover, “erroneously awarded incentive-based compensation” for executives, meaning any compensation given based on financial errors.
These rules speak to how complicated CEO compensation even is. There are so many factors that go into understanding how executives make their money that even looking at one year of executive pay doesn’t truly show the scope of their earnings. In some cases, a CEO’s pay may not seem excessive compared to a typical worker’s; in the most extreme example, Elon Musk has taken no cash salary from Tesla since 2019—but in 2021 he did exercise stock options that gave him a “realized” compensation worth almost $23.5 billion. “A single year snapshot does not provide the whole picture,” Rajappan says.
Changing the ratio
Rajappan is optimistic that there will be changes to CEO pay, in part because of the increasing number of regulations pushing for transparency around executive compensation, and the increasing interest from those even outside of the government on this topic. And still more guardrails may someday be put in place. Rajappan hopes that eventually CEO pay will be benchmarked to environmental, social, and governance (ESG) objectives, including diversity in addition to financial performance.
When it comes to new regulations intended to reign in that ratio, corporate America has fought back aggressively. Companies lobbied against the SEC’s newish pay ratio disclosure, arguing that it was too difficult for them to figure out their median worker pay, and then arguing that their part-time workers—who are included in that median pay calculation—should be recalculated as if they were full time. (The SEC pushed back, Anderson says, with the commission noting, in her words, “That it says a lot about your business model if you’re relying heavily on part time and temporary labor.”) Efforts to rein in lucrative CEO incomes will likely be met with the same level of resistance.
Anderson recently laid out in a report policy solutions that address stock buybacks, which inflate a company’s share prices, and are thus connected to executive pay because of how many CEOs get stock-based compensation. And others have proposed solutions to scale back outsized executive pay packages: Bernie Sanders and other senators have introduced the Tax Excessive CEO Pay Act, that would increase tax rates on companies with a pay ratio higher than 50 to 1. To prevent skewing the numbers when a CEO takes an incredibly low salary—like Elon Musk at Tesla—the law actually targets the highest-paid employee, not the CEO specifically. (The bill was referred to the Senate Finance Committee in 2021, but no other actions have since been taken). The Economic Policy Institute also advocates for tax penalties against companies with extreme ratios, and policies that increase shareholders’ abilities to control excess CEO pay.
In some places, these policies are already taking shape. In 2016, Portland, Oregon, approved a tax on businesses for which the CEO makes more than 100 times the typical worker. San Francisco did the same in 2020 (with increasing tax rates for higher ratios). Congress did try to use taxes to reign in executive pay with the Tax Cuts and Jobs Act of 2017, which repealed an exemption that allowed companies to deduct executives’ performance-based pay, though recent studies say it had little effect on pay packages. As to the local efforts, it’s not quite clear yet how they’re faring; the Portland tax has raised millions for the city, though some say it hasn’t affected overall CEO pay.
Tying taxes to pay ratios raises the question of what the ideal CEO-to-worker pay ratio should be. Already we’re seeing different answers: Portland and San Francisco focused on companies with a ratio above 100 to 1, while Sanders’s legislation targets ratios above 50 to 1. To the Institute of Policy Studies, the ideal ratio is closer to 20 to 1, an ideology that comes from management expert Peter Drucker (who no one would confuse with Bernie Sanders). “I have often advised managers that a 20-to-one salary ratio is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies,” he wrote in 1984.
Whether we can actually reach that ratio in the current climate is unclear, and Anderson notes it won’t happen “any time soon.” “But we consider it a good goal,” she says.
This story is part of Fast Company‘s CEO Fair Pay Report, click here to read the whole series.
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