Walmart’s CEO is making bank.
In a filing with the U.S. Securities and Exchange Commission on Friday, Walmart disclosed that CEO Doug McMillon’s compensation for fiscal 2018 was $22.8 million — a figure that is 1,188 times the annual total compensation of its median associate. (The median salary for that role — which includes more than 2 million workers — in fiscal 2018 was $19,177.)
That discrepancy places Walmart — the largest private employer in the U.S. — among the companies with the widest pay gap between the CEO and a typical worker. For context, the Equilar 100 study — which identified CEO pay at 100 of the largest U.S. companies that filed proxy statements before March 31 — determined that total average compensation for industry leaders reached $15.7 million in 2017. Meanwhile, the median CEO pay ratio was 235:1 — a sizeable gap but one that is nonetheless dwarfed by Walmart’s 1,188:1. (Only 69 companies on Equilar’s list had reported the ratio of CEO pay to that of a median employee at the time of the study.)
While several studies have shown CEO compensation in the U.S. edge up and down by a percent or two in recent years, overall, CEO compensation has risen by as much as 937 percent from 1978 to 2016, according to a report by the Economic Policy Institute in 2017. (Measures for gains in executive compensations vary depending on how they’re measured — using stock options granted or stock options realized.)
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The institute said CEOs of major U.S. companies earned 20 times more than a typical worker in 1965; this ratio grew to 30-to-1 in 1978 and 59-to-1 by 1989, and then it surged in the 1990s, hitting 376-to-1. It has generally normalized to a ratio in the high 200s-to-1 in recent years. (All figures based on realized stock options.)
The incongruity is staggering on its face, and dissecting the impact of a swelling CEO to median employee pay gap can be complicated.
“One thing to remember is the liability associated with being the CEO,” explained Piyush Patel, corporate culture expert and author of “Lead Your Tribe, Love Your Work.” “You are legally responsible for a large organization, and to attract the right type of person to take on a job like that takes a high compensation package.”
What’s more, in the case of Walmart — a publicly traded and “pay for performance” firm — a significant portion of CEO compensation is in the form of stock grants that are not realized until the company has met certain goals.
“For [CEO] Doug McMillon, the vast majority of his total compensation (76.4 percent) is contingent on performance,” said Randy Hargrove, senior director for national media relations at Walmart. “His compensation takes into account a stock grant of $15.7 million, which has not yet been earned or paid and will be determined based on the company meeting its performance goals that are aligned with our key financial priorities.”
Some industry observers have also suggested that pay ratio figures for retail can be misleading, as the industry tends to rely heavily on part-time and seasonal workers, which can distort calculations.
Still, excessive CEO pay can indicate disturbing truths about the bulk of America’s workforce — which has seen its annual compensation grow just 11 percent over the past few decades, according to the Economic Policy Institute.
“Regardless of how it’s measured, CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pay,” researchers for the Economic Policy Institute said. “Exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers.”
In addition, the awareness of just how hefty of a check the boss is taking home compared with the rest of a company’s employee base can dampen people’s moods.
“I think all of the employees want to work for someone who is successful, but when the discrepancy is [as large as Walmart’s], it will affect morale,” Patel said.
Walmart’s issues with employee compensation and benefits go back many years, and criticisms surrounding the company’s treatment of low-level employees have plagued the retailer for decades.
More recently, Walmart has moved aggressively to combat these issues — pledging in 2015 to invest $2.7 billion in higher wages, training and education for its workers.
With that investment came several raises to the company’s minimum wage — although several labor activist groups have alleged that the company’s pay hikes are often accompanied by layoffs or a reduction in hours for employees.
In January, Walmart committed to using its tax kickbacks to boost the starting wage rate for all hourly associates in the U.S. to $11, expand maternity and parental leave benefits, and provide a one-time cash bonus of up to $1,000 to certain associates. On that same day, it announced mass layoffs at Sam’s Club.
Still, the company has made progress on the labor front in recent years, noted Hargrove.
“The average full-time hourly associate earns about $14.10 an hour and key department manager roles start at $15 an hour,” he said, adding that hourly associates can earn as much as $24.70 an hour. “In 2017, store associates received more than $625 million in bonuses [and] last year, we promoted over 230,000 associates to jobs of greater responsibility and higher pay. We also converted nearly 150,000 associates from part-time to full-time.”
This story was updated at 3:55 p.m. ET to reflect new comments from a Walmart spokesperson.*