To calculate the Executive Pay Ratio (R):
\[ R = \frac{C_{CEO}}{C_{EMP}} \]
Where:
The executive pay ratio is a measure that compares the total annual compensation of a company’s CEO to the median annual compensation of its employees. This ratio is used to assess the income disparity within an organization and can provide valuable insights into the company’s compensation practices and overall fairness. A higher ratio indicates a larger gap between the CEO’s pay and the pay of the average employee, which can be a point of concern for stakeholders, including employees, investors, and regulators.
Let's assume the following values:
Step 1: Use the executive pay ratio calculation formula:
\[ R = \frac{1,000,000}{50,000} = 20 \]
The Executive Pay Ratio is 20.
