A law requiring public companies to disclose the median remuneration of their employees and to compare them with the remuneration of their CEO provides a few notable figures that highlight the income inequality in America.
Of the 40 largest companies in the Bay Area that reported, median employee remuneration last year ranged from $ 5,375 at Gap to $ 240,430 on Facebook.
The median is the center where half of the employees make more and the other half less. Gap said the median paid employee, a real person, was a part-time sales employee in Alabama who had worked for a partial year and whose salary was not on an annual basis. If you would instead compare senior software engineers to Facebook and Gap, their pay gap would be far less startling. But that is not what the law requires.
The salary ratio & # 39; s of CEO compared to employees at these two companies were also extreme.
Arthur Peck, CEO of Gap, took home $ 15.6 million or 2,900 times more than the median employee.
Facebook founder and CEO Mark Zuckerberg made 32 times what the median of Facebook deserved. Zuckerberg earned a $ 1 salary last year and did not receive any new stock exchanges (in addition to the $ 70 billion of Facebook shares he already holds). His compensation of $ 8.8 million last year was mainly for his personal safety data and the use of private aircraft.
Google parent alphabet said his median employee earned $ 197,274 last year; her CEO and co-founder Larry Page took home his usual $ 1 and produced a pay ratio close to zero.
Congress required this disclosure in the Dodd-Frank Act, adopted in 2010 in the aftermath of the financial crisis and growing outrage over the wealth of the richest 1 percent. The goal was to name and disgrace companies that are considered bad actors, said Jessica Schieder, a research assistant at the Economic Policy Institute.
Whether it helps to reduce the pay gap remains to be seen.
Companies whose financial year ends on 31 December have until Monday to report this information in their proxy statements. Companies with other endings, many of which will be, will report later this year. Some smaller public companies are exempt.
Nationwide, the average pay-to-pay ratio for nearly 1,600 companies that reported, is about 150 to 1, which is lower than expected, said Deborah Lifshey, a managing director with compensation agency Pearl Meyer. "Everyone was talking about 250," she said.
Using other data from last year, the Economic Policy Institute estimated that the average CEO earned 271 times more than the median worker in 2016, a decrease of 299 times higher in 2014 but "still light years beyond the 20-to-1 ratio in 1965 and the 59-to-1 ratio in 1989. "
It will require a number of years of data to see what impact the new disclosure has, said Mark Borges, a principal at Compensia, a compensation firm.
In 1992, largely in response to rising CEO compensation in a recession, the Securities and Exchange Commission has ordered public companies to publish compensation packages for their top executives in a table that is understandable by shareholders.
But instead of demanding a consideration, CEO's pay-negation came when they saw what peers were making, and their salaries went up, said Broc Romanek, editor of TheCorporateCounsel website. Now, he said, his companies are "support for the decline of employee morale" when employees find out that they earn less than the median.
The problem for employers is that "you can increase everyone's salary, and that half of the people are under the median," said Barbara Baksa, executive director of the national association of Stock Plan Professionals.
Companies have some leeway when it comes to identifying their median employee.
Initially, experts thought they would try to maximize the median to minimize the CEO's remuneration ratio. "In the course of time, the (human resources) community may have said that this is not your goal," because a higher minimum could lead to more dissatisfied employees, Lifshey said.
Placing a higher median wage could also make it easier to bully employees. But experts warn that it is difficult to make an apple-to-apple comparison between companies, because pay packages vary widely, as does the nature of their staff.
In order to determine the median remuneration, companies must first come up with a "reasonable" way to measure the compensation and then apply it consistently to all employees (except the CEO) to find the man or woman in the middle. Companies can choose which components of remuneration should be included and excluded within reasonable limits.
Most companies include base salary, overtime, bonus and commissions, but do not include health insurance and 401 (k) contributions, Lifshey said.
Companies that grant limited shares or stock options to most employees generally include this, but they can choose from different ways to value this for this purpose. Companies that are less generous with equity compensation may or may not include this.
To find the median employee, companies must include all full-time and part-time workers from a certain date.
They can pay wages for employees who have annualized annualized annual income, but can not convert the remuneration of a part-time employee into a full-time equivalent. They can not contain independent contractors who work for them. They can exclude a limited part of their overseas employees.
Once they have identified the median employee, all companies must calculate their annual remuneration in the same way, using the same formula that they must use to calculate the CEO's remuneration. In many cases this is different from the formula with which the median employee was identified. At this stage, they all have to value the value adjustment in the same way.
This helps to explain the radically different median wage numbers on Facebook and Gap.
"Given the composition of our workforce, we do not believe that the calculation of the remuneration ratio required by the SEC provides a complete picture of our remuneration practices," nor the value it attributes to employees, said Gap spokeswoman Trina Somera in an e-mail . "About 100,000 of our approximately 135,000 employees are sales employees." 97 percent of this number is part-time, about 55 percent is younger than 23 and 72 percent is paid at or above the market rate for their region.
On Facebook, spokesman Anthony Harrison said that $ 240,430 is "absolutely representative" for employee benefits. It includes restricted stock units, which receive almost all employees. It does not include the wages of shuttle drivers, security guards, janitors or other outsourced employees who "handle services that are not essential to our business."
Nationwide, retailers and other consumer discretionary companies publish the highest CEO remuneration ratios, averaging 434-on-1, according to the Pearl Meyer website.
Among the Bay Area salespeople, Ross Stores said the CEO earned $ 12.4 million against $ 9,437 for the median employee, a ratio of 1314 to 1.
Williams Sonoma reported a ratio of 1,477 to 1. The median employee was a part-time sales employee in New Jersey. If it excludes permanent part-time, temporary and seasonal workers, the retailer said, the median pay would rise to $ 38,776 from $ 9,771 and the pay ratio would drop to 372-to-1.
Utilities and financial companies (including banks) report the lowest ratios – 64 to 1 and 68 to 1 – nationally, respectively.
Wells Fargo reported a much higher ratio, 291 against 1, but other financial companies in the Bay Area were lower: 146 against 1 at Charles Schwab, 66 against 1 at First Republic Bank and 46 against 1 at Silicon Valley Bank.
The ratios at national technology companies are around 151 to 1, in line with the average for all sectors. But pay varies greatly, depending on how generous technology companies are with stock options and where their employees are employed. The same applies to other sectors.
Align Technology of San Jose, who makes Invisalign's popular hair straighteners, said his median worker is a technician in Costa Rica and earns $ 12,764, "which is a competitive reward for a technician position in Costa Rica."
The CEO has done that 920 times.
Kathleen Pender is a San Francisco Chronicle columnist. E-mail: email@example.com Twitter: @kathpender