High CEO-Employee Pay Gap Ratio Is Bad Business

New research finds that when lopsided pay ratios between C-suite and worker compensation make the news, sales drop as consumers are “significantly less likely to buy from companies with high CEO pay ratios,” reports the Wall Street Journal. These ratios will be making big news this year, following a mandate by the SEC that now requires public U.S. companies to disclose how much their chief executive officers are paid in comparison to the median pay of their company’s employees. That average ratio has climbed to more than 300 to 1 from 30 to 1 over the past 40 years. Researchers predict a hit to the bottom lines of companies with large corporate pay ratio gaps while “companies with low ratios could take this opportunity to trumpet that fact to consumers” and potentially increase sales and profits.

John Howell, Editorial Director