By Michael Hill
Correspondent
A “gaping,” growing gap between CEO and worker pay has partly fueled protests for higher living wages — a way to shrink income inequality.
What the Securities and Exchange Commission has just done may stoke that fire even more.
“The government doesn’t always make finesse types of things. It does surgery with a sledgehammer,” said Paul Dorf, chairman of Compensation Resources.
“I think it will renew calls for an even higher minimum wage here in New Jersey,” said NJ Working Families Policy and Communications Director Rob Duffey.
The SEC voted to require most public companies to compute and disclose the ratio between their chief executive officer’s yearly, often eight-figure compensation of stocks and salary and the midpoint of employee pay.
“In 1965, the average CEO made 20 times more than the average worker. Fine. Today, they make over 300 times more than the average worker. That’s an economy out of balance,” Duffey said.
“I’m not sure it’s going to tell us very much. Labor unions I think will use this as leverage for trying to negotiate better deals,” Dorf said.
For five decades, Dorf has been analyzing and consulting on executive pay. He says some of it lately is so high that he calls it “egregious” but hopes the new rule will level the playing and paying field for women and minorities.
“We know that there’s a lot of disparities and it would be very good if there was work done in that regard, trying to correct those ills. I don’t know if this is going to do much, but maybe it will,” Dorf said.
The SEC’s new rule comes from the five-year-old Dodd-Frank law regulating the financial services industry. Sen. Bob Menendez sponsored it.
“This creates, if nothing else, transparency and the ability for investors and those who represent workers to understand ‘Is there the right balance in the company that I’m investing in?” Menendez said.
One of the commissioners, a republican who voted no, called it a nakedly political rule meant to name and shame companies.
“I think it’s naming and shaming, yes, I think that’s part of it. Is it political? I don’t know that it’s political,” Dorf said.
“I think corporations that are under paying their workers while overpaying their CEOs should be named and should be shamed,” Duffey said.
Corporations complain the rule will cost them hundreds of millions of dollars to analyze compensation starting in 2017. Analysts say anticipate lawsuits to stop the enforcement of the new rule. On the campaign trail, Dodd-Frank has become sort of a rallying cry for some Republican presidential candidates who vow to repeal it, if elected.
