September 19, 2013
The Securities and Exchange Commission has narrowly approved a plan that would require companies to disclose how much more their chief executives are paid than their other employees. As The Washington Post reported on Sept. 18, business groups oppose the initiative, which has yet to be finalized, casting it as a costly attempt to shame corporations into limiting executive pay, with little benefit to shareholders.
Supporters say the disclosures will correct the wild disparities in compensation that sparked public outrage during the financial crisis, and help shareholders make more informed decisions. Investor advocates argue that extreme pay gaps undermine productivity by depressing employee morale and encouraging high turnover rates. Mary Jo White, the SEC’s Chairman, said the proposal fulfills the agency’s obligation to carry out a mandate imposed by the 2010 Dodd-Frank financial-overhaul law.
Corporate lobbyists are fighting to weaken or scuttle the pay-ratio initiative, arguing it would be tough for multinational corporations to gather pay data for employees spread across several countries, given currency fluctuations and other factors. Smaller firms say the number-crunching would drain their limited resources. According to the Economic Policy Institute, the average chief executive made 273 times what a typical worker earned last year. — Greg Beaubien