CEO pay ratio and pay gap are different measurements. The SEC CEO pay ratio divides a public company CEO’s annual total compensation by the annual total compensation of the company’s median employee (excluding the CEO). “Pay gap” is a broad term that must identify the groups being compared; in workforce reporting it often means the gender pay gap, such as the difference between men’s and women’s average hourly earnings.
Use the CEO ratio to examine executive compensation relative to a company’s workforce. Use a gender pay-gap statistic to examine earnings differences between women and men. Neither figure, by itself, explains why the difference exists or proves a legal violation.
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CEO pay ratio and gender pay gap at a glance
| Question | CEO pay ratio | Gender pay gap |
|---|---|---|
| Who is compared? | One CEO and the company’s median employee, excluding the CEO | Groups of workers, commonly women and men |
| What is measured? | Annual total compensation under SEC executive-compensation rules | Earnings under a stated statistical definition, such as average hourly earnings |
| How is it shown? | A ratio, such as 41:1 | A percentage difference, such as 18% |
| Who sets the method? | The company chooses a reasonable method allowed by SEC rules to identify the median employee | The statistical publisher chooses the earnings measure, population, period and coverage |
| What can it tell you? | How the CEO’s reported compensation compares with the company’s median worker compensation | How earnings differ between the specified groups under the chosen definition |
The two measures should not be substituted for one another. A CEO ratio is not a gender statistic, and a gender gap is not a CEO-to-worker calculation.
What the SEC CEO pay ratio measures
The calculation
Under SEC Item 402(u), a covered registrant discloses three linked figures: the annual total compensation of its CEO, the annual total compensation of its median employee other than the CEO, and the ratio between those two amounts. The basic calculation is:
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CEO pay ratio = CEO annual total compensation ÷ median employee annual total compensation
If a filing reports a ratio of 20:1, the CEO’s reported annual total compensation was 20 times the reported annual total compensation of the median employee for that fiscal year. The ratio compares amounts; it is not a percentage of the company’s payroll and does not describe the average employee.
Why the SEC requires the disclosure
The SEC adopted the rule to implement Section 953(b) of the Dodd-Frank Act. Mary Jo White, then SEC chair, described the 2015 rule as “a carefully calibrated pay ratio disclosure rule that carries out a statutory mandate” in the SEC’s adoption announcement (SEC, 2015).
The requirement applies to specified filings that contain executive-compensation disclosure. It does not apply to emerging growth companies, smaller reporting companies or foreign private issuers. A missing ratio therefore does not necessarily mean that a company declined to disclose it; the company may be outside the rule’s scope.
What counts as the median employee
The median employee is the worker in the middle of the company’s employee compensation distribution after the company has selected and applied its permitted method. It is not automatically the person with the company’s most common job, the average-paid worker or the median employee in every country where the company operates.
The SEC does not prescribe one universal procedure. A company may use statistical sampling or another reasonable method, and it may use a consistently applied compensation measure to identify the median employee. The rules also permit certain estimates and exclusions. The company must describe the method and material assumptions in its filing so readers can understand how the figure was constructed. The SEC’s Division of Corporation Finance says registrants have “substantial flexibility to determine the pay ratio” (SEC guidance, 2017).
How often the median must be selected
A company may generally identify its median employee once every three years. It must make a new determination sooner if a significant change in its employee population or compensation arrangements means the prior median would no longer be representative under the rule’s conditions. The company still needs to explain any use of the earlier median in the current filing.
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A ratio is a company-specific disclosure, not a standardized league table. Before comparing two issuers, read the methodology section of each proxy statement and check whether the underlying workforces and reporting years are alike.
Workforce composition
A company with many hourly, seasonal or part-time workers can have a lower median compensation amount than a company with a largely professional workforce, even if the two CEOs receive similar compensation. Differences in contractors, temporary workers and employee counts can also affect which people are included under each company’s approach.
Geographic mix
Global employers may have employees in countries with very different wage levels and currencies. The geographic mix can move the median independently of changes in the CEO’s compensation. A ratio based on a worldwide employee population should not be compared casually with one based on a more concentrated workforce.
Method, estimates and exclusions
Sampling choices, the compensation measure used to identify the median, permitted exclusions and estimates all influence the denominator. Two companies can comply with the same rule while using different reasonable methods. That is why a ratio should be read together with the filing’s explanation rather than treated as a precise ranking of management fairness.
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Stock awards, bonuses and other annual compensation can change sharply from one year to the next. Compare companies on aligned fiscal years where possible, and note whether a filing reused a median employee selected in an earlier year.
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A dated company example
The New York Times Company’s 2025 proxy statement reports a 41:1 ratio for fiscal 2024. It lists CEO annual total compensation of $7,821,993 and median employee annual total compensation of $192,315. The filing says the company reused the median employee identified in 2022 under the rule’s conditions (2025 proxy statement). Those amounts illustrate how one issuer calculated its ratio for one year; they are not a market-wide benchmark.
What “pay gap” means when the groups are women and men
The gender wage-gap definition
In ILOSTAT’s definition, the gender wage gap is the difference between men’s and women’s average hourly earnings, expressed as a percentage of men’s average hourly earnings. The calculation can be written as:
Gender wage gap = (men’s average hourly earnings − women’s average hourly earnings) ÷ men’s average hourly earnings × 100
For an illustration, if men’s average hourly earnings were $30 and women’s were $24.60 in the same measured population, the unadjusted gap would be 18%. The arithmetic is an example of the definition, not a claim about a particular employer.
Why the word “gap” needs a label
“Pay gap” can refer informally to executive-versus-worker differences, but it can also refer to gender, race, age, disability or other group comparisons. Always name the groups and the statistic. A sentence that says only “the pay gap is 18%” is incomplete unless it identifies the population, earnings measure, geography and period.
Average, median, hourly and monthly measures
The result depends on the data design. An average can be pulled by very high earners, while a median describes the midpoint. Hourly earnings can produce a different result from monthly or annual earnings, especially when working hours vary. Coverage of full-time and part-time workers, the reference period, the countries included and treatment of missing data can all change the reported percentage. A valid comparison states these choices instead of presenting a percentage as universal.
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Unadjusted does not mean unexplained
ILOSTAT’s gender wage-gap indicator is unadjusted for individual characteristics that may explain part of the observed difference. It describes the earnings difference under the selected definition; it does not isolate a single cause.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallPossible explanations can include the occupations and industries in which people work, seniority, hours, employment status, education, location, career interruptions and access to higher-paid roles. Determining how much each factor contributes requires additional data and an explicit statistical model. An adjusted analysis may account for selected characteristics, but its result depends on which characteristics are included and how they are measured. Neither an unadjusted percentage nor an adjusted estimate alone establishes whether a particular employer violated the law.
The latest global figure and how to quote it
In a 21 September 2026 release, the International Labour Organization said women earn around 18 per cent less than men globally on average (ILO, 2026). The figure is a global estimate with a stated date and scope. It is not a CEO-to-worker ratio, not a rate for every country or occupation, and not a measurement of every employer’s workforce.
When repeating a global figure, retain “around,” identify the ILO, and keep “globally” and the publication date attached to the number. A country-specific or company-specific claim requires data for that country or company rather than an inference from the global estimate.
Side-by-side: what each measure can and cannot answer
| Comparison axis | CEO pay ratio | Gender pay gap |
|---|---|---|
| Population | CEO versus median employee in one issuer | Women versus men, or another explicitly named pair of groups |
| Unit | Annual total compensation | Earnings, such as average hourly pay |
| Expression | Ratio (for example, 41:1) | Percentage difference (for example, 18%) |
| Construction | Company-selected median method within SEC rules | Dataset choices about statistic, coverage, period and population |
| Best use | Assessing executive compensation relative to that company’s workforce | Assessing earnings differences between specified groups |
| What it does not establish alone | The reason for the ratio, a fair-pay verdict or a cross-company ranking | The cause of the difference, discrimination by a particular employer or a legal violation |
Choose the measure by starting with the question
If you are asking about executive-versus-worker compensation
- Find the company’s proxy statement or other filing containing executive-compensation disclosure.
- Locate the CEO pay-ratio section and record the CEO amount, median employee amount, ratio and fiscal year.
- Read how the company identified the median: population date, compensation measure, sampling, exclusions, estimates and geographic scope.
- Check whether the median employee was selected in an earlier year and whether the filing explains why reuse was permitted.
- Compare another company only after aligning fiscal years and accounting for differences in workforce structure and method.
If you are asking about earnings differences by gender
- Identify the exact indicator: average or median, hourly or monthly earnings, and whether the result is raw or adjusted.
- Confirm the groups, geography, reference period and inclusion of full-time and part-time workers.
- Check the denominator used for the percentage; in ILOSTAT’s definition it is men’s average hourly earnings.
- Describe the result as an observed difference under that definition.
- Use additional evidence before attributing the gap to a specific cause or employer practice.
Common interpretation mistakes
Calling every executive-worker comparison a gender gap
A CEO ratio compares positions in a pay distribution, not sexes. Use “CEO pay ratio” for the SEC disclosure and reserve “gender pay gap” for a statistic that compares women and men.
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Turning a ratio into a percentage without explanation
A 41:1 ratio means the CEO amount is 41 times the median employee amount. It does not mean that 41% of compensation goes to the CEO or that 41% of employees earn less than the CEO.
Assuming the median is an average
The median is the midpoint after ordering employees by the selected compensation measure. It is not the company’s average employee compensation and can differ substantially from it.
Ranking companies from the headline number alone
Different employee populations, countries, fiscal years and permitted calculation methods can produce different ratios. A ranking that ignores those details creates false precision.
Presenting an unadjusted gender gap as proof of discrimination
An unadjusted gap is descriptive. It may reflect several observed characteristics and does not, without further analysis, identify the contribution of any one factor.
Dropping the date and scope from a global statistic
The ILO’s “around 18 per cent less” estimate is global and dated September 2026. Quoting it as a timeless rate for every labor market changes its meaning.
How policymakers and investors should use the figures
Both measures are disclosure and measurement tools, not complete explanations. Investors examining a CEO ratio can use the methodology, workforce description and year-over-year changes to frame questions about compensation policy. They should avoid treating one ratio as a standalone judgment about performance or fairness.
Analysts examining a gender gap should report the underlying statistic and its limitations, then decide whether an adjusted analysis is appropriate for the question. A national labor-market indicator can describe broad patterns; it cannot substitute for employer-level records when the question concerns one organization.
The SEC’s rule provides a common disclosure requirement for covered issuers while preserving methodological flexibility. Gender-gap statistics provide a way to describe differences between groups when their definitions are explicit. Keeping the populations, units and methods separate is the key to drawing a valid conclusion.
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