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Take heart, Americans: you're not the only ones who want a smaller CEO-worker pay gap. A new study from researchers at Harvard Business School and Chulalongkorn University in Thailand finds that the world over, people think CEOs earn much more than they should, but people's estimates of CEO pay are miniscule compared to the real numbers.
That in and of itself still may not be surprising; after all, it's easy to guess that CEOs everywhere earn a lot, and that everyday, non-masters-of-the-universe think those CEOs should earn less. But the scale of the numbers is staggering. Here's a look at what survey respondents in 40 countries said they think CEOs should earn (blue), compared to what they think CEOs do earn (red).
Source: Harvard Business Review
Respondents were asked open-ended questions about pay levels, answering questions about how much they think an unskilled worker, a cabinet minister or secretary, and a CEO of a "large national company" make (this is an important distinction; the average US CEO, for example, earns $178,400 per year). This chart measures ratios of CEOs to unskilled workers — that means Americans think CEOs earn around 30 times what an unskilled worker earns.
Now, of course, respondents were not judged on their accuracy — they aren't experts in compensation, and they very well may have guessed salaries for unskilled workers that likewise were way, way off.
What's interesting here is how much space people put between their estimates. Clearly, everyone expects some hefty inequality, albeit to varying degrees. However, the really surprising finding comes in when you compare these numbers to what CEOs do make (that is, CEOs of S&P 500 companies, as compiled by AFL-CIO). Below are 16 countries' results:
Source: Harvard Business Review
The obvious point here is how much CEOs' actual pay dwarfs estimated and ideal pay levels. And one other striking point is that American CEOs earn way, way more than those in other countries. But one fascinating additional point here is that the US stands out only in this way. American respondents didn't have fantastically high "ideal" or "estimated" CEO pay ratios compared to their international peers, yet top US CEOs are paid far more than those in other countries. In the US, people think a CEO would "ideally" earn 6.7 times what an unskilled worker would make, but they think those CEOs do earn around 30 times that worker's pay … and the average CEO actually earns more than 350 times that pay.
In other words, our views on ideal and even estimated CEO pay don't appear to be closely tied to the realities in our respective countries.
Correction. In one instance, this article said Americans think CEOs should earn 30 times what workers do. It is in fact that Americans think CEOs do earn that much. (But still, they're way off.)