AMERICANS AND CEO PAY:
2016 PUBLIC PERCEPTION SURVEY
ON CEO COMPENSATION
WWW.GSB.STANFORD.EDU/CGRI
TA B LE O F CO NTE NT S
Executive Summary and Key Findings...........................3
Review of Findings..............................................................6
Demographic Information..............................................11
Methodology....................................................................15
About the Authors...........................................................15
About Stanford Graduate School of Business and
the Rock Center for Corporate Governance...............17
Contact Information.......................................................17
EXECUTIVE SUMMARY AND KEY FINDINGS
CEOS ARE VASTLY OVERPAID, ACCORDING TO MOST AMERICANS.
MOST SUPPORT DRASTIC REDUCTIONS.
THE PUBLIC IS DIVIDED ON GOVERNMENT INTERVENTION.
Seventy-four percent of Americans believe CEOs are not paid the
correct amount relative to the average worker. Only 16 percent
believe they are. While responses vary across demographic
groups (e.g., political affiliation and household income), overall
sentiment regarding CEO pay remains highly negative.
“There is a clear sense among the American public that CEOs are
taking home much more in compensation than they deserve,”
says Professor David F. Larcker of Stanford Graduate School of
Business. “While we find that members of the public are not
particularly knowledgeable about how much CEOs actually
make in annual pay, there is a general sense of outrage fueled
in part by the political environment.”
“Corporations and their boards need to do a better job
explaining and justifying CEO pay arrangements,” adds Nick
Donatiello, lecturer in corporate governance at Stanford
Graduate School of Business. “It is remarkable when 74 percent
of Americans agree about anything in today’s environment—
particularly something as politically charged as CEO pay. This
is a warning that companies need to do a better job of justifying
CEO pay levels by communicating how much value their CEO
creates and how much compensation is required, given the
market for talent, to attract and motivate the right people.”
According to Brian Tayan, researcher at Stanford Graduate
School of Business, “Whether high pay packages are deserved is
a controversial subject. Whether the government can or should
1
intervene is even more divisive. Public consensus is that there
is a problem. There is much less agreement on a solution.”
The controversy over CEO compensation has reached new
heights with labor unions, media, and political candidates
from both major parties expressing public criticism. According
to Democratic candidate Hillary Clinton, the average CEO
“… is now earning 200 times the average hourly wage. Twenty
years ago the ratio was about forty times. People all over this
country are really upset about this.” According to Republican
candidate Donald Trump, CEO compensation is a “total and
complete joke. … They get whatever they want.” On its website,
the AFL-CIO cites a CEO-to-worker pay ratio of 331:1, adding
that “… in recent decades, corporate CEOs have been taking a
greater share of the economic pie while wages have stagnated
and unemployment remains high.” A Bloomberg report
claims “… the gap between pay for U.S. chief executive officers
and the people who work for them has widened sevenfold in
three decades. Are bosses seven times smarter these days?
Company boards seem to think so.” 1
Recently, the Rock Center for Corporate Governance at Stanford
University conducted a nationwide survey of 1,202 individuals—
representative by gender, race, age, political affiliation,
household income, and state residence—to understand public
perception of CEO pay levels among the 500 largest publicly
traded corporations.
SALLY BEDELL SMITH, FOR LOVE OF POLITICS (NEW YORK, NY: RANDOM HOUSE, 2007); DAVID KNOWLES, “TRUMP CALLS CEO PAY A ‘JOKE’ BUT VOWS TO SLASH CORPORATE TAXES,” BLOOMBERG.COM
(SEPTEMBER 13, 2015); AFL-CIO, “EXECUTIVE PAYWATCH 2014”; CALEB MELBY, “EXECUTIVE PAY: VALUING CEOS,” BLOOMBERG.COM (AUGUST 13, 2015).
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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KEY FINDINGS INCLUDE THE FOLLOWING:
THE AVERAGE AMERICAN GROSSLY UNDERESTIMATES
HOW MUCH CEOS MAKE
Public frustration with CEO pay exists despite a public perception
that CEOs earn only a fraction of their published compensation
amounts. Disclosed CEO pay at Fortune 500 companies is 10
times what the average American believes those CEOs earn. The
typical American believes a CEO earns $1 million in pay (average
of $9.3 million), whereas median reported compensation for
the CEOs of these companies is approximately $10.3 million
(average of $12.2 million).2
Responses vary based on the household income of the
respondent, but all groups underestimate actual compensation.
Lower-income respondents (below $20,000) believe CEOs
earn $500,000 ($9.7 million average), while higher-income
respondents ($150,000 or more) believe CEOs earn $5,000,000
($14.9 million average).
STILL, AMERICANS BELIEVE CEOS ARE OVERPAID
RELATIVE TO THE AVERAGE WORKER
The vast majority (74 percent) of Americans believe that CEOs
are not paid the correct amount relative to the average worker.
Only 16 percent believe they are paid an appropriate amount.
While responses vary by political affiliation, they remain largely
2
negative. Only one quarter (25 percent) of Republicans believe
CEOs are paid the correct amount relative to the average
worker, compared to 16 percent of Democrats and 11 percent
of Independents.
Nearly two-thirds (62 percent) of Americans believe that there
is a maximum amount CEOs should be paid relative to the
average worker, regardless of the company and its performance.
Interestingly, a majority of all political groups believe CEO pay
should be capped in some manner, though Republicans are
somewhat less likely to hold this opinion (52 percent) than
Democrats (66 percent) or Independents (64 percent).
Those who believe in capping CEO pay relative to the average
worker would do so at a very low multiple. The typical
American would limit CEO pay to no more than 6 times (17.6
times, based on average numbers) that of the average worker.
These figures are significantly below current pay multiples,
which are approximately 210 times based on recent
compensation figures.3
“CEO compensation figures are much higher than the public
is aware of,” observes Professor Larcker. “In many parts of the
country, it is incomprehensible that anyone can earn this much
money. It is understandable that any limit on CEO pay would be
low for most citizens.”
MEDIAN VALUE REPRESENTS THE VIEWPOINT OF THE RESPONDENT AT THE 50TH PERCENTILE. THE MEAN AVERAGE IS THE AVERAGE AMOUNT ACROSS ALL RESPONSES. MEAN AVERAGES CAN BE INFLUENCED BY
A RELATIVELY SMALL NUMBER OF OUTLIERS, AND FOR THIS REASON MEDIAN AVERAGE IS A BETTER DESCRIPTOR OF A TYPICAL RESPONDENT’S VIEWPOINT. REPORTED COMPENSATION FIGURES FROM EQUILAR,
“2015 CEO PAY STRATEGIES” (2015).
3
BASED ON MEDIAN CEO COMPENSATION FIGURES IN EQUILAR 2015 AND AVERAGE U.S. PER CAPITA INCOME OF $50,000.
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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OPINIONS VARY ON HOW MUCH TO PAY CEOS
FOR PERFORMANCE
Public opinion varies widely about the degree to which
executives should share in the value created at a company. For
example, when respondents are given a hypothetical situation
in which a company’s value increases by $100 million over the
course of a year, the median respondent believes that the CEO
should receive only 0.5 percent ($500,000) as compensation.
The mean response is 3.2 percent ($3.2 million). Responses do
not vary by political affiliation, with Democrats, Republicans,
and Independents willing to share value in roughly the same
proportion.
“This gets to the heart of the issue of ‘pay for performance,’”
says Donatiello. “Either the public is not sold on the idea that
CEOs should share in value creation to the extent that they
do. Or they do not believe that CEOs play an important role
in value creation. Clearly, companies need to make a stronger
case for how pay is tied to performance—to the extent it is.”
AMERICANS AGREE THERE IS A PROBLEM
BUT ARE SPLIT ON WHETHER THE GOVERNMENT
SHOULD GET INVOLVED
The public strongly believes that CEO compensation is a
problem. A large majority (70 percent) hold this opinion,
compared with only 18 percent who do not think it is a
problem. The view that CEO pay is a problem is substantially
more prevalent among those who identify themselves as
Democrats (78 percent) and Independents (72 percent) than
those who identify themselves as Republicans (54 percent).
Perhaps unexpected, lower-income respondents are less likely
to believe that CEO pay is a problem (54 percent) than higherincome respondents (72 percent).
In terms of a solution, approximately half of respondents
(49 percent) believe the government should do something
to change current CEO pay practices, approximately onethird (35 percent) do not believe the government should
intervene, while the remainder have no opinion. Higherincome respondents (38 percent) are much less likely to favor
government intervention than middle-income (55 percent)
and lower-income (52 percent) respondents. Republicans
and Independents (36 percent and 47 percent, respectively)
are also less likely to favor government intervention than
Democrats (60 percent).
POSSIBLE GOVERNMENT ACTIONS VARY,
NONE OF WHICH IS WIDELY SUPPORTED
Those who favor government intervention support a range
of possible actions, although none alone receives majority or
even close to near-majority support. Twenty-eight percent of
respondents who advocate government intervention would
substantially increase taxes on CEO compensation above a
certain amount; 25 percent would set a strict limit on the dollar
amount a CEO can receive relative to the average worker; 17
percent would limit the absolute dollar amount that a CEO can
receive; 17 percent would require more performance-based
compensation; 9 percent would ban the use of stock options in
executive compensation contracts; and 8 percent would ban
the use of all equity compensation in CEO pay packages.
Responses do not vary significantly by income bracket.
However, higher-income respondents are less likely to support
both absolute and relative limits on CEO pay. They are also
less likely to support higher taxes on CEO pay.
Responses do vary by political affiliation, with Democrats
significantly more likely than Republicans to support each of
the interventions listed above.
“The concept of government intervention in restricting or
influencing CEO pay is highly charged,” observes Tayan. “It is
not surprising that viewpoints on government intervention
would be split along ideological lines, especially given the
current political environment.”
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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Review of Findings
1.
How much do you think the average CEO in the largest
500 U.S. companies is paid in annual compensation?
Mean
Median
$9,275,340
$1,000,000
Less than
$20,000
I don’t
know
16%
74%
11%
$5,000,000
26%
19%
$150,000 or
more
18%
Less than
$20,000
Independent
Mean
Median
No
6%
$150,000 or
more
I don’t know
POLITICAL AFFILIATION
$14,597,140
Republican
15%
3%
$50,000 but less
than $60,000
Yes
78%
77%
75%
61%
$1,350,000
$1,000,000
$7,223,028
$1,000,000
79%
56%
Median
$10,867,203
$2,000,000
No
79%
POLITICAL AFFILIATION
$9,651,960
Yes
$14,868,207
$50,000 but less
than $60,000
Mean
Democrat
In general, do you think that CEOs in the largest 500 U.S.
companies are paid the correct amount relative to the
average worker?
HOUSEHOLD INCOME
$1,000,000
$11,251,409
$500,000
$9,718,672
HOUSEHOLD INCOME
2.
None or Other
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
25%
16%
8
Democrat
14%
%
Republican
Yes
No
11%
11%
Independent
11%
14%
None or Other
I don’t know
6
3.
In general, do you believe there is a maximum amount
that a CEO should be paid relative to the average
worker, no matter the company and its performance?
Yes
No
I don’t
know
62%
28%
10%
3.1. [If yes]: If the average worker in a company has an annual
income of $50,000, what is the maximum amount the CEO
of that company should make?
Mean
Median
$882,054
$300,000
HOUSEHOLD INCOME
70%
4%
8%
$50,000 but less
than $60,000
No
Less than
$20,000
I don’t know
$50,000 but less
than $60,000
Mean
POLITICAL AFFILIATION
10%
Democrat
9%
Republican
Yes
No
13%
Independent
$500,000
34%
23%
$849,424
39%
24%
$200,000
62%
%
$634,607
64%
52
Median
POLITICAL AFFILIATION
$1,075,983
66%
$150,000 or
more
$200,000
Yes
$150,000 or
more
$725,384
Less than
$20,000
$400,000
19%
$225,000
22%
$100,000
$361,753
39%
23%
$733,113
57%
$1,000,000
58%
$1,704,060
HOUSEHOLD INCOME
5%
None or Other
I don’t know
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
Democrat
Republican
Independent
Mean
Median
None or Other
7
4.
Hypothetically, if a company is worth $100 million more than at the beginning of the year, how much of this $100 million should
be given to the CEO as compensation?
Less than
$20,000
$50,000 but less
than $60,000
Mean
Democrat
$1,000,000
$150,000 or
more
Median
Republican
Independent
Mean
Median
$500,000
$500,000
$5,373,080
[Only people who said Yes to Q3]
$3,082,360
$500,000
$3,648,513
$500,000
$2,837,763
POLITICAL AFFILIATION
$2,951,500
$500,000
$250,000
$3,227,537
$2,962,925
Median
$300,000
Mean
$5,832,586
HOUSEHOLD INCOME
Mean
Median
$2,401,215
$250,000
None or Other
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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5.
In general, do you believe that CEO compensation at the
largest companies in the U.S. is a problem?
6.
Do you believe the government should do something to
change current CEO pay practices?
Yes
No
I don’t
know
Yes
No
I don’t
know
70%
18%
12%
49%
35%
17%
HOUSEHOLD INCOME
HOUSEHOLD INCOME
77%
72%
55%
52%
53%
54%
31%
21%
17%
15%
6
Yes
No
29
%
19%
17%
7%
%
$50,000 but less
than $60,000
Less than
$20,000
$150,000 or
more
Less than
$20,000
I don’t know
10%
$50,000 but less
than $60,000
Yes
POLITICAL AFFILIATION
78
38%
30%
No
$150,000 or
more
I don’t know
POLITICAL AFFILIATION
60%
%
72%
51%
54%
36%
13
9
%
Democrat
13
%
Republican
Yes
No
15% 13%
Independent
12% 11%
17%
None or Other
I don’t know
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
42% 42%
32%
26%
33%
%
47%
21%
14%
Democrat
13%
Republican
Yes
No
Independent
17%
None or Other
I don’t know
9
6.1. [If yes]: What should the government do? (select all that apply)
28%
Substantially Increase taxes on CEO compensation over a certain amount
25%
Set a strict limit on the dollar amount a CEO can receive relative to the average worker
17%
Require more performance-based compensation
17%
Set a strict limit on the dollar amount a CEO can receive
9%
Ban the use of stock options
8%
Ban the use of all equity compensation
HOUSEHOLD INCOME
29%
28% 28%
21%
21%
22%
22%
20%
19%
17%
16%
9%
6%
Set a strict limit
on the dollar
amount a CEO
can receive
relative to the
average worker
Set a strict limit
on the dollar
amount a CEO
can receive
Substantially
Increase taxes
on CEO
compensation
over a
certain amount
Less than $20,000
Require more
performance-based
compensation
5%
7%
5%
Ban the use of
stock options
$50,000 but less than $60,000
6%
5%
Ban the use
of all equity
compensation
$150,000 or more
POLITICAL AFFILIATION
37%
29%
26%
19%
19%
17%
31
%
27%
29%
22%
22%
17%
15%
16
%
15%
31%
12%
14% 31%
14
31%%
11%
6%
Substantially
Increase taxes on CEO
compensation over a
certain amount
Set a strict limit on the
dollar amount a CEO
can receive
Democrat
Set a strict limit on the
dollar amount a CEO
can receive relative to
the average worker
Republican
Require more
performance-based
compensation
Independent
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
7
%
Ban the use of
stock options
6%
3%
8%
5%
Ban the use of all
equity compensation
None or other
10
Demographic Information
1. Gender
54%
Male
47%
Female
2. Age
65 and older
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
18-24
17%
11%
13%
7%
9%
7%
9%
9%
9%
9%
3. Ethnicity
White
Black or African American
Hispanic or Latino
Asian or Pacific Islander
Native American or Alaskan Native
Other
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
70%
10%
9%
8%
1%
1%
11
4. Political Affiliation
Democrat
Independent
Republican
None or other
36%
36%
23%
6%
5. Household Income
$150,000 or more
$125,000 but less than $150,000
$100,000 but less than $125,000
$75,000 but less than $100,000
$60,000 but less than $75,000
$50,000 but less than $60,000
$40,000 but less than $50,000
$30,000 but less than $40,000
$20,000 but less than $30,000
Less than $20,000
8%
9%
11%
17%
7%
8%
7%
10%
12%
11%
6. State
California
Florida
Texas
Illinois
New York
Ohio
Pennsylvania
Maryland
North Carolina
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
12.8%
11.1%
7.4%
5.7%
5.3%
3.9%
3.3%
3.0%
3.0%
12
Georgia
Michigan
Virginia
New Jersey
Washington
Massachusetts
Missouri
Oklahoma
Oregon
Wisconsin
Alabama
Arizona
Indiana
Iowa
Colorado
Tennessee
Connecticut
Minnesota
Louisiana
Kentucky
Utah
Nevada
South Carolina
Arkansas
Hawaii
District of Columbia
Idaho
Kansas
Mississippi
Nebraska
2.9%
2.8%
2.7%
2.3%
1.9%
1.8%
1.8%
1.8%
1.8%
1.8%
1.7%
1.7%
1.7%
1.5%
1.3%
1.3%
1.2%
1.2%
1.0%
0.9%
0.9%
0.8%
0.8%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.6%
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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Delaware
New Mexico
West Virginia
Maine
North Dakota
New Hampshire
Rhode Island
South Dakota
Vermont
Montana
Alaska
Wyoming
0.4%
0.4%
0.4%
0.3%
0.3%
0.2%
0.2%
0.2%
0.2%
0.1%
0.0%
0.0%
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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METHODOLOGY
IN NOVEMBER 2015, THE ROCK CENTER FOR CORPORATE GOVERNANCE
AT STANFORD UNIVERSITY CONDUCTED A NATIONWIDE SURVEY OF 1,202
INDIVIDUALS—REPRESENTATIVE BY GENDER, RACE, AGE, POLITICAL
AFFILIATION, HOUSEHOLD INCOME, AND STATE RESIDENCE—TO UNDERSTAND
PUBLIC PERCEPTION OF CEO PAY LEVELS AMONG THE 500 LARGEST PUBLICLY
TRADED CORPORATIONS.
ABOUT THE AUTHORS
DAVID F. LARCKER
David F. Larcker is the James Irvin Miller Professor of Accounting at Stanford
Graduate School of Business; director of the Corporate Governance Research
Initiative; and senior faculty of the Arthur and Toni Rembe Rock Center for
Corporate Governance. His research focuses on executive compensation and
corporate governance. Professor Larcker presently serves on the Board of
Trustees for Wells Fargo Advantage Funds. He is coauthor of the books A Real
Look at Real World Corporate Governance and Corporate Governance Matters.
Email: dlarcker@stanford.edu
Twitter: @stanfordcorpgov
Full Bio: http://www.gsb.stanford.edu/faculty-research/faculty/david-f-larcker
NICHOLAS DONATIELLO
Nicholas Donatiello is a recognized expert in the areas of consumers, media,
and technology. He is president and CEO of Odyssey and a lecturer at Stanford
Graduate School of Business, where he lectures on the roles, responsibilities,
and performance of boards in public, early stage private and not-for-profit
companies. Donatiello is Chairman of the Board of several of the American
Funds from Capital Research and Management. He is also a member of the
Board of both public and early stage private companies including Dolby
Laboratories, where he chairs the Compensation Committee, and Big 5
Sporting Goods. Donatiello is a director of the Schwab Charitable Fund, one of
the nation’s largest grantmaking charities, distributing more than $1 billion in
annual grants to charities. He chairs the Compensation Committee.
Email: donatiello@stanford.edu
Twitter: @nickdonatiello
Full Bio: http://www.gsb.stanford.edu/faculty-research/faculty/nicholas-donatiello
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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ABOUT THE AUTHORS (CONT)
BRIAN TAYAN
Brian Tayan is a member of the Corporate Governance Research Initiative at
Stanford Graduate School of Business. He has written broadly on the subject of
corporate governance, including the boards of directors, succession planning,
compensation, financial accounting, and shareholder relations. He is coauthor
with David Larcker of the books A Real Look at Real World Corporate Governance
and Corporate Governance Matters.
Email: btayan@stanford.edu
ACKNOWLEDGMENTS
THE AUTHORS WOULD LIKE TO THANK MICHELLE E. GUTMAN OF
THE CORPORATE GOVERNANCE RESEARCH INITIATIVE AT STANFORD
GRADUATE SCHOOL OF BUSINESS FOR HER RESEARCH ASSISTANCE ON
THIS STUDY.
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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ABOUT
CORPORATE GOVERNANCE
RESEARCH INITIATIVE
The Corporate Governance Research Initiative at Stanford
Graduate School of Business focuses on research to advance
the intellectual understanding of corporate governance, both
domestically and abroad. By collaborating with academics
and practitioners from the public and private sectors, we
seek to generate insights into critical issues and bridge the
gap between theory and practice. Our research covers a
broad range of topics that include executive compensation,
board governance, CEO succession, and proxy voting.
gsb.stanford.edu/cgri
THE ROCK CENTER FOR
CORPORATE GOVERNANCE
The Arthur and Toni Rembe Rock Center for Corporate
Governance is a joint initiative of Stanford Law School
and Stanford Graduate School of Business. The center
was created to advance the understanding and practice of
corporate governance in a cross-disciplinary environment
where leading academics, business leaders, policy makers,
practitioners, and regulators can meet and work together.
www.rockcenter.law.stanford.edu
CONTACT INFORMATION
FOR MORE INFORMATION ON THIS REPORT, PLEASE CONTACT:
HEATHER HANSEN
ASSISTANT COMMUNICATIONS DIRECTOR
Stanford Graduate School of Business
Knight Management Center
Stanford University
655 Knight Way
Stanford, CA 94305-7298
Phone: +1.650.723.0887
hhansen@stanford.edu
Copyright ©2016 Stanford Graduate School of Business and the Rock Center for Corporate Governance
AMERICANS AND CEO PAY: 2016 PUBLIC PERCEPTION SURVEY ON CEO COMPENSATION
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