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Chief executive officers (CEOs) from the ranks of chaebol controlling shareholders (chairmen’s family members) received average compensation equivalent to 35 times the amount paid to regular workers last year, a report calculated.

The gap was also found to be growing from year to year, with CEOs from chaebol family earning more than professional manager CEOs.

The Economic Reform Research Institute (ERRI) published the findings on Mar. 14 as part of a report analyzing relative compensation for CEOs and employees within companies.

According to the report, average compensation for 776 CEOs of chaebol companies totaled 1.55 billion won (US$1.37 million) over the four years from 2014 to 2017, amounting to 21 times the 69 million won (US$60,836) in average compensation earned by employees. Among the CEOs of chaebol companies, chaebol family members who had previously been controlling shareholders averaged 1.79 billion won (US$1.58 million) in compensation over the four-year period, increasing the difference in compensation to 28 times. In contrast, average compensation for professional manager CEOs – even within the same chaebol businesses – amounted to just 17 times the employee’s compensation at 1.19 billion won (US$1.05 million).

The compensation gap between CEOs hailing from chaebol families and regular employees has increased from year to year, rising from 24.2 times in 2014 to 26.4 times in 2015, 29.7 times in 2016, and 34.5 times in 2017. In comparison, the compensation gap between all CEOs (including professional manager CEOs) and employees dropped from 20.7 times in 2014 to 19.7 times in 2015 and 19.8 times in 2016 before rising again to 23.6 times in 2017.

“This pattern of the compensation gap between all chaebol company CEOs and employees narrowing and then expanding again is attributed to differences in the rate of increase for compensation of CEOs and employees,” explained ERRI.

“In 2015, employee compensation increased at a faster rate than CEO compensation, while the reverse was true for 2016 and 2017,” the institute explained.

Average compensation for 1,258 CEOs of non-chaebol companies totaled 1.03 billion won (US$907,600), or 18 times the average of 55 million won (US$48,464) for employees. The numbers point to a larger compensation gap between CEOs and employees at chaebol companies compared to non-chaebol companies. Even in the case of non-chaebol companies, the compensation gap between former controlling shareholder CEOs and employees was larger than the gap between former professional manager CEOs and employees by a margin of 19 times to 15 times. At the same time, the gap was relatively smaller than in the case of the chaebol companies.

ERRI also raised the need for improvements in employee scope and methods of declaring employee compensation. In terms of employee scope, it stressed that all employed persons apart from executives (registered and unregistered) should be clearly defined, with announcements not only of average per capita employee compensation but also of median compensation for all employees besides the CEO (as with US Securities and Exchange Commission regulations) to allow the distribution of compensation to be gauged.

By Kwack Jung-soo, business correspondent

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