"Bart Naylor" "Financial policy reform"The simplest and most straightforward requirement in the Dodd-Frank Wall Street Reform Act may be section 953(b), which asks corporations to disclose the CEO’s pay as a multiple of the median-paid employee at the firm.

So far, the Securities and Exchange Commission (SEC) has yet to write the rule that will cause corporations to publish this number. But corporate America says the SEC should shelve its plans to require companies to disclose this ratio because … no one cares about it.

It’s booooorrrrr-innnnng.

So boring, in fact, that the U.S. Chamber of Commerce recommended that the SEC summon experts from around the country for a series of summits on the topic. A letter from the U.S. Chamber to the SEC reads, “It is unclear how the pay ratio disclosure will be material for the reasonable investor when making investment decisions.”

So tantamount to watching paint dry is the pay ratio that corporate America convinced one-term- (and now, former-) Congresswoman Nan Hayworth, a New York Republican, to propose an act of Congress to repeal this Dodd-Frank provision. Hayworth explained that the “information is not beneficial.” So dreary is the ratio that the Republican-controlled House financial services committee in 2011 conducted a hearing on it. So unworthy of attention, the pro-corporate committee approved her bill. The official report said the number would “yield little useful information.”

So ho-hum is this matter that, on Feb. 21 the Center on Executive Compensation penned an angry missive to SEC Commissioner Luis Aguilar. The commissioner had suggested that companies should voluntarily publish the pay ratio ahead of the SEC’s stalled rulemaking on the matter. In response, the Center’s president wrote that his organization “remains strongly opposed to the disclosure” because ”investors are not asking for the information.”

Such a waste of breath, huffed a columnist for CFO.com, Aguilar was “wasting his breath” by addressing the issue.

Of course, CEOs may need to alert the public about our lack of interest, because polls show we do, in fact, care about excessive CEO pay.

CEOs must also tell board members they don’t care, despite a survey by USC’s Marshall School of Business, which found that a majority of board members believe compensation perquisites should decrease.

CEOs should have to explain to shareholders that it’s progress that pay for the top five corporate executives of a given company represented 5 percent of shareholder earnings in the early 1990s, but grew to 10 percent by the early 2000s.

CEOs should tell workers whose morale and productivity suffer working under overpaid CEOs that their morale and productivity is just fine.

In 1980, the ratio of CEO to average pay was 42-1.

By 2012, that figure grew to 343-1.

Clearly, that’s progress as well.

Bartlett Naylor is the financial policy reform advocate for Public Citizen’s Congress Watch division. Follow him on Twitter at @BartNaylor.

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Comments

  • rshannon

    Well put. At this risk of nit-picking, however, the Paywatch source cited for the historical ratios mentioned in the final sentences states that the 1980 42:1 ratio comprised CEO pay vs. average employee pay, as reported above, but the 2012 343:1 ration was relative to median employee pay. Unfortunately, although the Paywatch source seems to clearly state the distinction, neither it nor this report informs us whether it’s significant.
    We should and do demand clarity and accuracy from mainstreet media (MSM), and rightly critique when it’s lacking. Let’s keep our own reporting standards high, before the opposition misrepresents and/or distorts the significance of unnecessary, avoidable imprecision.

  • rshannon

    Oops! Ratio, not ration. Mainstream, not mainstreet. Obviously, I too should be more careful.

    Which reminds me that one of the few benefits of an advanced age is that one finally has a universal excuse (or at least a lame bluff) for almost everything. Even when you’re called on it, blaming one’s age remains a convenient way to acknowledge, indirectly, that you’re guilty of mere common carelessness, or really haven’t got a clue, etc., without actually having to say so. ;-)

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