Earlier this month, we learned [5] that the average employee at 10 legendary "Unicorn startups [6]" is valued at somewhere around $8 million. These startups include Uber, Airbnb, Snapchat, Palantir, SpaceX, Pinterest, Dropbox, Wework, Theranos, and Square.
These "businesses" are valued at a combined $165 billion courtesy of the largely arbitrary and completely ridiculous [7] methodologies employed by founders and their enthusiastic VC backers. Nevermind the fact that between them, they generate but $4 billion in revenue.
Meanwhile, employees at real businesses are worth far less. Take McDonald’s for instance (which, even in its diminished state, still brings in more revenue in three months than all of the Unicorns listed above pull in over the course of a year - combined) where the enterprise value per employee is a paltry (by comparison) $200,000.
[8]
But while the value per employee may vary widely across corporate America and Silicon Valley, one thing is constant - a vast disparity between the average worker and the C-suite.
As we noted at the end of June, CEOs in the US are back to making an average of 300 times what their employees make and although that’s short of the all-time high set near the peak of the dot-com bubble, we aren't far from the top.
[9]
Now, Bloomberg is out with a new study [10] based on their own calculations and while it seems that their computation methods are predisposed to understating the case compared to the Economic Policy Institute's figures (shown above), the data still suggests that for at least three American CEOs, the gap between their compensation and that of their employees is even wider than the 303:1 ratio from the preceding chart.
Here's Bloomberg's list:
[11]
More color [10]:
McDonald’s might have some explaining to do.
The fast-food chain has one of the highest ratios of CEO pay to that of the company’s average worker, at 644 to 1, according to data compiled by Bloomberg. Under a requirement approved last week by the U.S. Securities and Exchange Commission, public companies such as McDonald’s will have to disclose a similar metric annually, handing new ammunition to critics of C-suite pay packages.
McDonald’s former chief executive officer isn’t even close to topping the list of highest-earning U.S. execs last year, but that doesn’t matter. The figure the SEC is requiring measures CEO pay against the median compensation of all employees, an unfavorable ratio when your workforce includes a lot of burger flippers and fry cooks.
Some companies where top managers earned millions more last year than the $7.3 million paid to McDonald’s Don Thompson (who stepped down in March) actually have lower ratios. Examples include JPMorgan Chase and hospital operator Community Health Systems, both of which have pay gaps exceeding 200 to 1, which are still among the widest of all U.S. companies.
To be sure, estimates relying on data that are currently available will probably differ from what companies report when the SEC rule kicks in two years from now. For instance, the SEC is allowing companies to omit a limited percentage of workers overseas, where wages might be lower.
Bloomberg estimated average worker pay by identifying businesses’ reported salaries and benefits expenses, and dividing that by the total number of workers.
