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Profit distribution formula

I recently had this idea that we should start to measure the division of companies profits between the owners and employees similarly as we measure other metrics like P/E ratio, ROE, quick ratio etc. In case these metrics were easily available for everyone (e.g., on job hunting websites) this could be used by prospective and current employees when negotiating a salary and considering a potential employment. Easiest way to achieve this would be to simply divide payroll costs with profit after taxes that can be distributed to the owners from equity. For example, in case a company’s payroll costs are 1 and profit after taxes is 4, then the ratio would be 1/4. In other words, employees receive 20% of total “profits” irrespective of taxes while owners receive 80%. In case a similar figure was calculated for example for all S&P 500 companies, it would be possible to calculate averages,…


I recently had this idea that we should start to measure the division of companies profits between the owners and employees similarly as we measure other metrics like P/E ratio, ROE, quick ratio etc. In case these metrics were easily available for everyone (e.g., on job hunting websites) this could be used by prospective and current employees when negotiating a salary and considering a potential employment.

Easiest way to achieve this would be to simply divide payroll costs with profit after taxes that can be distributed to the owners from equity. For example, in case a company’s payroll costs are 1 and profit after taxes is 4, then the ratio would be 1/4. In other words, employees receive 20% of total “profits” irrespective of taxes while owners receive 80%.

In case a similar figure was calculated for example for all S&P 500 companies, it would be possible to calculate averages, medians and compare industry averages etc.

What do you guys think?

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