You’re probably ignoring the most important number in your company

Public companies in America are required by law to publish one number: the ratio between what it pays its CEO and what it pays its median worker. The rule has been in force since 2017. The number sits in every proxy statement on the exchange. Most leaders cannot tell you their own. When you do look, the numbers are not subtle. The average across the S&P 500 was 285 to 1 in 2024. At the hundred lowest-paying large firms it averaged 632 to 1. At Starbucks it once reached 6,666 to 1. In 1965 the same ratio was about 21 to 1. The easy way to read these stats is moral. A company that pays its CEO 285 times its lowest worker has decided some people are worth 285 times other people. That frame feels true, and it ends the conversation. It puts horns on one side and a halo on the other, and nobody on the inside recognizes themselves in it—because who wants to identify with horns?—so nothing changes. Here is the more useful read. The number is the sum of compensation decisions made one at a time by people who were mostly not thinking about the ratio at all. Yet, even if the ratio is the result of several decisions compounding rather than a deliberate choice, it is a powerful indicator of a company’s culture. So why don’t we change it? The easy answer is that the people setting the ratio benefit from it. For boards, that is mostly not true. Directors are not protecting their own pay when they approve a CEO package. They are trying to land the person they believe will make the company worth more. And they set that number the way almost every board does. They pull comparison data. They look at what peer companies pay their CEOs. They land near the middle, because nobody wants to explain why they paid below market for the person who runs everything. The flaw is built in because the benchmark only ever compares CEO pay to CEO pay. No one in that room compares the ratio to other ratios. It is a habit that shows up everywhere people set pay. We benchmark the top against other