It's universal: Everyone thinks CEOs make too much
When it comes to feeling burned by income inequality, Americans aren't alone.
A new study from researchers at the Harvard Business School and Thailand's Chulalongkorn University found that people across the globe believe chief executives earn way too much. But what's even more startling than the apparently universal belief that CEOs are overpaid is that respondents deeply underestimated the actual pay gap.
The study asked residents of 40 countries ranging from Denmark to South Korea to provide responses to open-ended questions about pay for CEOs versus unskilled workers. Respondents were hardly socialists: Across the board, they believed that CEOs make 10 times that of unskilled workers, although they pegged the ideal ratio at 4.6. In real life, however, the income disparity is much, much bigger.
"In the United States in 2012, for example, the average yearly compensation for CEOs of S&P 500 companies was $12.3 million, about 354 times the pay for an average worker of $35,000," the study from Harvard Business School's Michael I. Norton and Chulalongkorn University's Sorapop Kiatpongsan notes.
American respondents pegged the disparity at the less mind-boggling ratio of 29.6, which the study's authors point out demonstrates "Americans drastically underestimated the gap in actual incomes between CEOs and unskilled workers."
What's clear is that people across the globe believe there should be some type of income disparity, with the man or woman in the CEO's office earning more than the average Joe. But people aren't realizing just how huge that gap has grown.
Interestingly, the study also broke down responses according to formal education, socioeconomic status, political leanings and age. Even though there were differences, with poorer respondents estimating greater income disparity between CEOs and unskilled workers, for instance, every subset still underestimated the actual pay gap.
Almost one-quarter of respondents said they believed differences in income inequality in their countries had grown too large, the study found.
"As a result, [the findings] suggest that -- in contrast to a belief that only the poor and members of left-wing political parties desire greater income equality -- people all over the world, and from all walks of life, would prefer smaller pay gaps between the rich and poor," the authors concluded.