Conventional wisdom among compensation professionals holds that geographic pay differentials (differences in the cost of labor between different geographic locations) tend to disappear for top level management jobs. Economic Research Institute (publisher of, among other things, the Geographic Assessor reference materials) is now challenging that wisdom, at least in the nonprofit sector, based on data collected in a new survey (and highlighted in their April 2007 newsletter).
An illustrative example of geographic pay differentials in CEO salaries for hospitals at $100 million in revenues for eight different states, as reported by ERI, is summarized below. (Presented below is the state, the CEO pay level for the aforementioned size hospital, and that pay level as the average across all eight states)
- California: $327,101 (111% of average)
- New York: $321,301 (109% of average)
- Arizona: $316,489 (107% of average)
- Florida: $294,586 (100% of average)
- Kansas: $287,859 (98% of average)
- Louisiana: $284,941 (97% of average)
- Wisconsin: $264,778 (90% of average)
- Indiana: $259,010 (88% of average)
Does the fact of these differentials hold true in the for-profit sector? Its hard to say; none of the executive compensation surveys I am familiar with report data by state in this fashion, so the information to either prove or disprove this assertion is difficult to come by. I suspect that these patterns of differential do exist - at least to some extent - in the for-profit sector, but they may be impacted or modulated by a host of factors, not the least of which is the extent to which companies recruit nationally, or even internationally, for their executive talent.
Any thoughts or data out there? I'd welcome them!
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