Illinois companies disclose CEO-to-worker pay difference

(File photo of money being exchanged at a store by Joe Raedle/Newsmakers)

CHICAGO — Illinois companies have begun disclosing the pay differences between their chief executive and their median employees.

Congress mandated the ratio reporting requirement in the 2010 Dodd-Frank Act, the Chicago Tribune reported. It’s meant to give shareholders more information for managing executive compensation.

The Securities and Exchange Commission allows companies to exclude up to 5 percent of their workforce that’s outside of the U.S. Companies can also choose whether to include health benefits in the calculation or make cost-of-living adjustments for geographic differences.

McDonald’s Corp. CEO Steve Easterbrook was paid almost $22 million last year, while the company’s median employee received around $7,000 annually. The fast-food company has the largest ratio in Illinois at 3,101 to 1.

McDonald’s defines a median employee as a part-time hourly restaurant crew member in Poland, where wages are lower than in the U.S. and it didn’t use any of the exclusions allowed. Companies, like McDonald’s, with global workforces and that rely on part-time or temporary employees tend to have higher pay gaps. Easterbrook’s pay is also based on company performance, and the company’s value grew $36 billion last year.

Kraft Heinz CEO Bernardo Hees made almost $4.2 million last year, compared to its median employee pay of about $46,000. The company has a much smaller CEO-to-worker pay ratio at 91:1.

“We should be well-aware of these pay ratios because they may come back to bite those companies if they’re way out of whack,” said Jay Rehak, president of the board of the Chicago Teachers Pension Fund.

Equilar is a compensation research company that’s been tracking company disclosures across the Russell 3000 index. In mid-April, the media reported pay was 72 to 1. Ratios ranged from 5,908 to 1 at Weight Watchers to 0.1 to 1 at Texas-based Energy Transfer Partners, whose CEO took a $1 annual salary.