The CEO Pay Ratio: What Dodd-Frank Required Companies to Disclose

Dodd-Frank Section 953(b) required something simple and previously uncharted: every public company had to calculate its CEO's total compensation, calculate the median compensation of all its employees, and publish the ratio. The SEC finalized the rule in 2015. Starting with 2017 proxy statements, the number was public.

The number, for S&P 500 companies, is roughly 272:1 by the AFL-CIO's 2023 measure. The Economic Policy Institute puts it at 344:1. Both are in range of the same story: the median S&P 500 company pays its CEO two to three hundred times what it pays its middle-of-the-workforce employee.

Key findings

Dodd-Frank 953(b) mandated SEC rules requiring CEO-to-median-worker pay ratio disclosure in annual proxy statements.
The SEC finalized the rule in August 2015; first disclosures were in the 2018 proxy season, covering FY2017.
AFL-CIO PayWatch 2023: average S&P 500 CEO pay ratio approximately 272:1.
Economic Policy Institute 2022 report: average CEO pay ratio for S&P 500 CEOs at 344:1, depending on measurement approach.
EPI historical data: the CEO-to-typical-worker compensation ratio was approximately 21:1 in 1965, 61:1 in 1989, and 344:1 in 2022.
Disclosure is mandatory and SEC-enforced; no evidence in published research that mandatory disclosure has compressed ratios in aggregate.

How the ratio is calculated

The CEO's total compensation is taken from the Summary Compensation Table in the proxy, the same figure used for other executive compensation disclosures. This includes base salary, bonus, equity awards (valued at grant date), pension changes, and other compensation. For large equity-heavy packages, equity is typically the largest component.

The median employee's compensation is where companies have flexibility. The rule permits statistical sampling across a global workforce, a company doesn't have to calculate every employee's compensation precisely. It must identify the median employee within that statistical framework and calculate their actual annual total compensation.

The flexibility matters for interpretation. A retail company that employs thousands of part-time hourly workers globally will have a lower median than one that employs primarily full-time salaried professionals in high-cost markets. Companies in services, retail, and food are consistently at the high end of CEO pay ratios; companies in financial services and technology can be at either end depending on workforce structure.

Business chart showing growth in executive compensation over time — EPI's historical data on CEO pay relative to typical worker pay shows a ratio that was approximately 21:1 in 1965 and 344:1 in 2022. Dodd-Frank 953(b) created the disclosure mechanism. It did not create a policy response. *Photo via Pexels. Pexels License.*

The five highest ratios in the S&P 500

The AFL-CIO tracks the highest individual CEO pay ratios each year. Consistently in the annual top ten:

Large retail chains where CEOs receive hundreds of millions in equity while front-line workers earn near minimum wage
Fast-food and restaurant chains
Staffing companies with a primarily part-time or contractor workforce
Companies in labor-intensive sectors that have undergone significant union-avoidance campaigns

The highest individual ratios, in the 3,000:1 to 5,000:1 range in some years, occur at companies where the CEO's equity-based package was particularly large in a given year AND the workforce is concentrated in low-wage markets.

Has disclosure changed anything?

The theory behind 953(b) was transparency as a corrective: if shareholders, workers, and the public could see the ratio, they might respond. Eight years of data suggests the corrective mechanism hasn't fired significantly at the aggregate level.

Possible explanations:

Equity-heavy pay structures. The largest component of CEO compensation at major S&P 500 companies is equity. Equity values tied to stock performance make arguments for compression politically difficult, the CEO "earned it" when the stock went up.
Compensation committee capture. Bebchuk and Fried's 2004 analysis in Pay Without Performance argued that compensation committees at major companies are not arm's-length negotiators; they're populated by directors appointed by management and advised by compensation consultants whose fees depend on continued engagement. Disclosure doesn't fix the committee structure.
Investor passivity. Most institutional shareholders vote compensation proposals (say-on-pay) through proxy advisors whose guidance typically approves packages that meet relative peer-group benchmarks, a system where everyone's benchmarked against peers who are also rising.

A stack of corporate proxy voting materials and annual report documents — Say-on-pay votes, required for US public companies under Dodd-Frank, give shareholders a non-binding advisory vote on executive compensation packages. As of 2023, compensation packages rarely receive less than 70% support at major companies. *Photo via Pexels. Pexels License.*

The international comparison

Several European jurisdictions have gone further than the US disclosure-only approach. The UK requires listed companies to publish a CEO pay ratio alongside a narrative explaining the ratio and its trend over time, under regulations effective from 2020. German co-determination law requires worker representation on supervisory boards at companies above certain size thresholds, giving workers a direct voice in executive compensation decisions that the US governance structure doesn't provide. The Netherlands and France have similar co-determination frameworks.

The UK and EU approaches don't cap ratios either, but they require narrative explanation that the US rule doesn't. A company with a 500:1 ratio in the UK must explain, in its annual report, how that ratio has changed over time and what the company's approach to pay fairness is. That narrative obligation creates a different kind of accountability than disclosure alone.

The UK Pay Ratio reporting introduced in 2020 showed that median pay ratios at FTSE 100 companies were broadly consistent with US S&P 500 levels, suggesting the ratio pattern isn't uniquely American. The governance response to those disclosures in the UK has included more active engagement by institutional shareholders and, in some cases, shareholder votes against compensation packages that resulted in actual reductions.

What the US evidence shows after eight years: disclosure without a binding mechanism produces information without a policy consequence. The ratio is visible. It doesn't change without something attached to it that makes change in the interest of the board or shareholders who control the compensation decision.

Say-on-pay votes, the closest thing to a binding mechanism in the US, are advisory. Boards can and do proceed with packages that shareholders vote against. The Starbucks compensation structure that produced the 1,400:1 ratio in Niccol's first year passed the board's compensation committee unanimously. The disclosure that produced the ratio and the board structure that approved it coexist without friction.

What 953(b) doesn't require

The pay ratio discloses the number. It doesn't require companies to explain the ratio in any particular terms. It doesn't trigger any corrective mechanism if the ratio exceeds a threshold. There is no ratio limit, no penalty, and no binding say-on-pay vote. The say-on-pay vote under a separate Dodd-Frank provision is advisory; boards can and do proceed with approved compensation packages that shareholders vote against.

Several European jurisdictions, the UK, Germany, Netherlands, have gone further, requiring narrative explanation of ratio trends over time or setting non-binding target ratios in company governance codes. No US equivalent has passed.

Business colleagues seated at a table during a negotiation meeting — Executive compensation packages are negotiated at the highest levels of corporate leadership, often resulting in pay multiples hundreds of times larger than the median worker salary, the gap that Dodd-Frank's CEO pay ratio rule was designed to expose. Photo: Gabby K via Pexels. Pexels License.

The WokeCorp assessment

What 953(b) accomplished. The ratio is public. Anyone can look up the CEO pay ratio for any S&P 500 company and understand how the compensation structure compares to median workforce pay. That transparency is real. Before 2018, the figure didn't exist in a comparable, standardized form.

What it hasn't accomplished. Ratios have not declined in the post-disclosure period in aggregate. The median ratio has not compressed. The disclosure mechanism assumed that transparency would function as a corrective; the evidence doesn't support that assumption at the aggregate level.

The governance question. If the compensation committee structure Bebchuk and Fried identified remains unchanged, and if the shareholder voting mechanism remains advisory, the pay ratio number is information without a policy uses attached. That's a different outcome from what the provision's designers intended.

The Business Roundtable's 2019 Statement on the Purpose of a Corporation committed member CEOs to deliver value to workers. See The Business Roundtable Pledge: Five Years In for where those commitments landed.

The Business Roundtable Pledge: Five Years In, 181 CEOs pledged to deliver value to workers; the compensation data
Starbucks: CEO Pay vs. Barista Wages, a specific case study in the ratio
Airline Buybacks and the CARES Act, a different form of the worker-shareholder distribution question

Sources

Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 953(b), Public Law 111-203 (2010). Verified June 2026.
Securities and Exchange Commission, Pay Ratio Disclosure Final Rule, effective January 1, 2018. 17 CFR Parts 229 and 249. Verified June 2026.
AFL-CIO, Executive PayWatch 2023 Report. Verified June 2026.
Economic Policy Institute, "CEO Pay in 2022," August 2023. Verified June 2026.