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Biggest US banks had widest CEO pay ratios in 2018

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Biggest US banks had widest CEO pay ratios in 2018

The compensation divide between CEOs and employees narrowed slightly for big U.S. banks in 2018, the second year that CEO pay ratio disclosures were mandated by the SEC.

An S&P Global Market Intelligence analysis of compensation disclosures from publicly traded U.S. banks with assets totaling at least $20 billion found that the median CEO pay ratio in 2018 was 87-to-1. By comparison, the median CEO pay ratio for U.S. bank CEOs in 2017 was 94.50-to-1.

Within that group of 53 companies, Citigroup Inc. had the widest 2018 CEO pay ratio as its top executive brought home $486 for every $1 an employee earned. The bank's median employee compensation for 2018 was $49,766. The next five largest CEO pay ratios came from JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp., PNC Financial Services Group Inc. and U.S. Bancorp.

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Mandated by the Dodd-Frank Act, the CEO pay ratio rule requires that public companies release total CEO compensation, the median total compensation of all other employees — including part-time employees and those based outside of the U.S. — and the ratio between the two. The rule, which went into effect in 2018, was designed to provide a window for shareholders, corporate watchdogs and employees to better understand how a company's compensation practices work. But the metric has also faced some pushback, as skeptics question its usefulness given the flexible structure companies can use to determine the pay ratio.

"It's almost an arbitrary number," said Deb Lifshey, a managing director at compensation advisory firm Pearl Meyer & Partners, in an interview. "In 2010, it was sort of meant to guilt-shame large corporations. It's not driving decisions."

The most recent round of CEO pay ratio disclosures comes amid a continued push across corporate America, Wall Street and Washington to address the rising tide of income inequality in the U.S.

To tackle some of those issues, corporate stakeholders, lawmakers and investor advocacy groups have emphasized the importance of fixing gender pay gaps, cost-of-living discrepancies and other issues to management teams over the last several years, efforts that Lifshey said are having a greater impact than the CEO pay ratio disclosures.

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Comparatively smaller banks had much narrower pay ratios than the largest moneycenters in 2018. First Citizens BancShares Inc., a Raleigh, N.C.-based bank with $35.96 billion in assets of March 31, had the smallest CEO pay ratio at 46-to-1 and a median employee compensation of $61,193. Texas Capital Bancshares Inc., which posted the smallest CEO pay ratio in 2017, closely trailed First Citizens with a CEO pay ratio of 46.7-to-1 for 2018. The bank, which had $28.38 billion in assets as of March 31, posted a median employee compensation of $88,658 versus the industry median of $62,049.

Still, the metric did come into focus during a recent hearing on Capitol Hill, where Rep. Nydia Velázquez, D-N.Y., questioned Citigroup CEO Michael Corbat about his compensation and how it stacks up to the bank's employee base.

"If you're not happy with the pay ratio at your firm, then there are two ways to correct it, because believe me, it doesn't look good," Velázquez said at the April 10 hearing. "Lower your salary or raise the salary of others. So let me ask you this question: If you were an employee and you saw your boss making $486 for every $1 you make, how would you feel about that situation?"

Corbat, in response, said he would "be hopeful that there's opportunity to advance within the firm." On May 2, Corbat elaborated on his comments in an interview on CNBC, saying he hopes his message was inspirational to Citigroup employees. Corbat added that he started at the bank in 1983 making $17,000 a year, which adjusted over time would be a little more than $43,000 in 2019.

"The numbers are challenged themselves because they're not apples to apples," Corbat said in the CNBC interview. "Our average employee in the United States makes right about $100,000 a year."

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Click here to view median employee salary and CEO to median employee salary ratio data for banks covered in this analysis.