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Would You Pay .5% of Your Salary to Employ Your CEO?

Jan 21

Let’s say you make $50,000. That means you would pay $250 annually to keep your CEO employed.

Are you willing to do that?

That’s, on average, how much each employee of a Fortune 500 company pays for their corporate F500 CEO in terms of the executive compensation of a CEO. Now, I know you don’t really pay any money out of your check to your CEO, directly. But, if your company wasn’t paying your CEO millions of dollars, could they be paying you a little more?

Or, do you believe the compensation your CEO is making is giving you, and all the other stakeholders of your organization, a good return on your investment?

A new study is out that looks at this issue:

How much a typical employee of the S&P500 firms implicitly “contributes” to the salary of his/her CEO? An amount of $273 on average or 0.5% of one’s salary, that is, one half of one percent on an individual salary basis. To assess whether such a contribution is worthwhile, one must determine the value of the CEO for the organization and its workers and stakeholders.

I love the mental exercise of this. Being a CEO of a small business it truly brings into perspective what you bring, or don’t bring, to those you work with each day. At the level of a Fortune 500 CEO, and the amount of CEO compensation at those giant companies, it’s hard to even imagine!

Tim Cook, the CEO of Apple, had a total compensation of $125 million dollars in 2019, down from $136 million in 2018. Do you think the employees of Apple would be willing, across the board, every single one, to pay .5% of their salary to keep Tim as CEO or go with a cheaper option?

Better yet, Apple is a very successful, profitable company. If the employees of Apple chose another CEO making, let’s say, only $10 million per year, would that profitability really change that much?

Many people have this argument around college and professional coaches ‘ salaries in sports. Does an NCAA coach making $8 million a year at a power 5 conference, really that much better than a coach making $500K at a mid-major program? Probably not. CEOs probably aren’t that much different. It’s very rare to find a leader, or coach, who is truly transformational that you can point to and say, yep, Timmy is definitely worth what he’s getting paid!

It would be an interesting internal study within your organization to see what percent of your employees would say they would be willing to pay it. It’s really a great measure for your CEO to understand their impact and worth, and probably bring them down to reality a bit.

What do you think? Would you be willing to pay .5% of your salary to your CEO!?! HRU employees – you don’t have to answer this! I already know you would! 😉

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