McKinsey and the CEO-to-worker Pay Gap

Anyone who has worked in the corporate milieu knows that the arrival of McKinsey on the scene tends to not be a sign of good news for the rank and file. What is less known is McKinsey’s role in the creation of the CEO-to-worker gap itself. In 1951, General Motors hired McKinsey consultant Arch Patton to conduct a multi-industry study of executive compensation. The results appeared in Harvard Business Review, with the specific finding that from 1939 to 1950, the pay of hourly employees had more than doubled, while that of “policy level” management had risen only 35 percent. If you adjusted that for inflation, top management’s spendable income had actually dropped 59 percent during the period, whereas hourly employees had improved their purchasing power.

Financial journalist Duff McDonald has a book coming out this fall about McKinsey & Company, the American consulting firm that has had a significant impact on how big business in the U.S. is run. And according to his piece in the New York Observer, they’ve also had a major influence on the CEO-to-worker pay gap. While wages have flatlined for millions of workers across the country, C.E.O. pay has skyrocketed. It all goes back to 1935.

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