The CEO-to-Employee Pay Gap: Evidence from UK Firms

Martin Conyon and Laura Read


This paper investigates the CEO-to-employee pay gap. Empirical evidence is provided for a sample of about 900 publicly traded UK firms from 1984 to 1998. CEOs were paid about thirteen times the typical employee pay during the sample period. The CEO-to-employee pay ratio sharply increased from about 7 at the start of the period to about 19 at the end of the period. The CEO-to-employee pay gap is larger in union firms but this fact is accounted for by differences in enterprise scale. The CEO-employee pay gap is bigger in large firms. Conditional on firm size, the predicted CEO-to-employee pay gap is, in fact, smaller in union firms compared to non-union firms. Finally, the distribution of the CEO-to-employee pay gap is different for union and non-union firms. Specifically, the predicted size-adjusted gap is generally smaller in union firm contexts.