Ask Dr. Salary: CEO Salaries: PayScale in the New York Times

I was excited to wake up today and see an article about PayScale in the New York Times. Together with a recent article in Business 2.0 magazine, PayScale has been getting very good press lately.

As a person born just across the river in New Jersey, The New York Times has always represented the height of newspaper publishing to me. While it is great to be quoted in The Province (Vancouver, BC), seeing such a prominent article in the NYT says PayScale is real to my friends and family back east.

While the New York Times article was fair in describing the strengths and weaknesses of PayScale and our competitors, one small item annoyed me. As regular readers will suspect, the issue of CEO salaries in New York City touched on my obsession with mean vs. median.

Before reading another pedantic post on statistics, why not take a couple minutes to compare your salary using PayScale's salary calculator, as seen in the New York Times!

It is probably stupid to nitpick, since Damon Darlin's article was fair and did not actually say anything that was incorrect. However, it implied a confusion about median and mean. The lines that tweak my obsession are:

"PayScale data also say that a chief executive in New York City averages $248,278. When you stop laughing,... "

I stand behind our statement that the median CEO salary in New York City is around $250,000 a year in cash compensation. There are four key factors to understanding how this salary can be so much lower than typical New York Times reader's expectations that it causes her/him to laugh:

According to our data, a typical CEO in New York City directs a median of about 30 employees. This is not surprising: in the US, there are only about 4,700 CEOs at the 5000 largest companies, while there are millions of small business CEOs. The median (half smaller, half larger) number of employees lead by a CEO is very small.
The pay for CEOs depends strongly on the number of employees.
We only report cash compensation (salary). Many CEOs are owners, or have large stock or stock option holdings. Steve Jobs was paid only a $1/year in cash compensation for most of the last decade by Apple. His total compensation including equity exceeded $20 million/year.
The NYT writes about 100 stories on CEOs at the top 5000 companies for every one it writes on CEOs of 30 employee companies. :-)

I forgive the New York Times readers: they are not to blame for thinking about top CEOs, not typical CEOs, since they only ever read about top CEOs.

This brings me to why we ask a dozen or so questions per job in our salary survey. For a CEO, the industry, company revenue, number of employees, experience, etc. all affect salary.

Without being told about these and other factors, PayScale cannot give an accurate salary estimate for an individual. PayScale's goal is to be as accurate as possible for each employee's unique set of skills, qualifications, experience and job.

Cheers,

Al Lee