The 17 highest paid CEOs in the world in 2017 each have salaries above $28 million, earning hundreds of times more than what the regular employees at their companies do. The United States is an absolute leader in CEO pay, as top executives at the largest companies get paid 271-times more on average than a typical worker, according to a European Policy Institute study. In other countries, because of either high income taxes or lower cost of living, CEOs get paid less. In addition, in some countries, especially in Europe, CEO compensation is capped in order to reduce income inequality.
According to EPI, the average CEO compensation at the largest companies, including stock options, amounted at $15.6 million. Bloomberg estimated that CEO pay averages $16.9 million among S&P 500 companies, which is 2.6-times higher than what the CEOs of foreign companies make. On the other hand, in China, CEOs get paid 90% less than the global average, although many companies in the country don’t disclose executive compensation and many CEOs get lots of benefits, such as housing that is not included in disclosures.
One of the main reasons why American CEOs have such high salaries is because the bulk of the world’s largest companies are headquartered in the U.S. In addition, the regulations in the country allow these companies’ board of directors to pay higher salaries to top executives and to take tax deductions on them. In fact, in many cases, when activist investors launch campaigns to push for change at publicly-traded companies, they point out the disparities between the company’s performance and the high CEO pay. To address this issue, the Securities and Exchange Commission imposed a rule in 2015 that requires public companies to disclose the ratio of the compensation of CEOs and the median pay of employees. Companies should start filing those disclosures next year for the compensation paid in 2017.
As stated earlier, in the U.S, the average gap between the CEO and employees is 271-to-1, although it’s lower than the 376-to-1 ratio that was registered in 2000. By comparison, in 1989, this ratio stood at 59-to-1, while in 1965, it was 20-to-1. However, regular citizens don’t realize how big this discrepancy actually is, which is one of the reasons why the difference in compensation between CEOs and average workers is big. A couple of years ago, Chulalongkorn University’s Sorapop Kiatpongsan and Harvard Business School’s Michael Norton conducted a study, which examined how people see the discrepancy between top executives and unskilled workers and what this discrepancy actually was. The study showed that in the U.S, people perceived the difference in pay as 30-to-1, while in fact it was 350-to-1. This misconception leads to a lack of effort from people to pressure their governments and employers to narrow the gap.
Having said that, let’s take a closer look at the 17 highest paid CEOs in the world in 2017. The data on compensation is taken from Equilar‘s list of the largest CEO pay packages. Afterwards, don’t miss our article on the 11 Most Innovative Companies in the World.