Compensation of CEOs – New Perspectives and New Metrics

Marcel Boyer and Molivann Panot
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Marcel Boyer: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Molivann Panot: CIRANO - Centre interuniversitaire de recherche en analyse des organisations [Montréal, Canada] = Center for Interuniversity Research and Analysis on Organizations [Montréal, Canada]

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Abstract: This paper reports CEO compensation data from the SEC as of December 31, 2022, for all S&P 500 firms, regrouped into 10 industries based on the Bloomberg classification. It presents the breakdown of the corresponding CEO's compensation, showing the proportion of incentive components in total amounts, as well as the variety of approaches used to establish compensation. The relative compensation of CEOs is at the heart of discussions on inequality, and whether a given CEO is worth the pay she/he is getting remains an open question. The CEO pay ratio, measured as the CEO's total compensation relative to the median comprehensive pay of a firm's employees, is the most frequently quoted number in the popular press. For S&P 500 firms, the largest US companies by capitalization, this ratio reached an average value of 292 in 2022. While many observers focus on the CEO pay ratio, other measures may be more informative and relevant for stakeholders, including employees and shareholders. To show how much employees implicitly "contribute" to their CEO's total pay, we propose alternative ratios, such as the CEO pay per employee and the B-ratio, which measures CEO encompassing pay as a percentage of total payroll, thereby giving the employees' contribution as a percentage of their respective pay. To assess whether such employees' contributions are worthwhile, one must determine the value of the CEO for the organization, its workers, and stakeholders. Such value rests on the CEOs' role and the practical impact of their leadership in ensuring the company's success, sustainability, and job security. The way questions are framed influences perceptions by the firm's stakeholders, highlighting the need for proper analysis using appropriate metrics.

Date: 2025-12-05
Note: View the original document on HAL open archive server: https://hal.science/hal-05399861v1
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