The gap between the earnings of those at the top of a company and of the average worker at the same company has been noticeably widening in recent years - so much that what was once a gap may soon be called a chasm. Companies defend executive salaries, citing a need to remain competitive, and higher executive salaries have been linked to increased company profitability. However, this does not explain why the average employee is not compensated with this same competitive drive in mind or why the gap between executive and average employee incomes continues to increase.[1] Also given little consideration are the less obvious losses felt by companies with high executive-to-worker pay, which include poor employee morale, reduced company loyalty, and decreased ability to execute tasks with multiple players. [2]

The general population has a skewed understanding of the actual relationship between executive and average worker pay. According to a study by the Harvard Business Review (HBR), United States citizens reported their ideal CEO-to-worker ratio to be 6.7 to 1 and estimated the ratio to be 12 to 1. This ratio in the United States is actually 354 to 1, according to the HBR's application of average Fortune 500 CEO pay data and average annual worker wage data from the US Bureau of Labor Statistics. [3]

Increasing gaps in pay carry concerns over the stability of the economy and about general inequality. [4] In addition to a provision in the Dodd Frank Act, a portion of which aims to force executives to publicly disclose salaries, a cap on the executive-to-worker pay ratio, or maximum wage ratio, should be considered as a policy tool to support future economic gains for all.

Publicly-held data on executive salaries for the largest companies both in the U.S. and in North Carolina allow us to gain a sense of the differences in compensation between executives and their average employee. Using data on executive pay compiled by the AFL-CIO’s Executive Paywatch and matching that to U.S. Census Bureau data on average pay in various industry sectors, our analysis finds that the companies with the highest executive to worker pay ratios in North Carolina are also among those paying their rank-and-file employees wages below or just above our definition of low-wage.

In 2013, the North Carolina-based companies with the largest executive-to-worker pay ratios were Lowe’s, VF Corp, Hanesbrands, Krispy Kreme, Cato Corp and Harris Teeter—each was at least 190 to 1. Meanwhile, the wages of the average worker in these companies’ industries were sometimes below and in other cases barely above 150% of the federal poverty line, our designation for low wage work. Using U.S. Bureau of Labor Statistics data on average industry wages, the annual average wages for employees at these companies' industries in 2013 are shown in the table above.

Of the North Carolina-based companies with the sixty highest paid executives in 2013, those in retail trade tended to have the largest executive-to-worker pay ratios. Four of the top six companies by executive pay fall into that category, an industry where workers tend to earn modest wages. This chart presents all 60 companies, divided by industry type as defined by the company’s two-digit NAICS code, a federal designation. 

Explore the gap between executive salaries and average annual worker wages for various companies and industries by hovering over bars in the interactive chart below.