Take Action: Tell SEC to Require Disclosure of CEO-to-Worker Pay Ratios

Click here now to tell the SEC to require companies to disclose CEO-to-worker pay ratios. If you own stock, click here to get information on how to vote your shares on “say-on-pay” proxy proposals

The Dodd-Frank act requires it but the SEC has failed to act and has come under increased pressure from business lobbying groups to drop the rulemaking altogether. CEO pay is out-of-control, but we have a chance to rein it in.

CEOs of the largest companies now make 380 times the pay of the average worker in the United States. This growing income inequality is hurting our nation’s economy and working families.

As I have noted in many posts, according to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), the aggregate compensation paid by public companies to their top-five executives during the period 1993-2003 totaled about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003.

At the same time, few firms want to admit to having average executives, so they seek to compensate their executives at above-average levels. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average and their collective pay spiraling out of control.

Runaway CEO pay is bad for our economy and it’s bad for the morale of working families. Employees at every level, from the executive suite to the mailroom, contribute to making a company successful.

But companies act as if CEOs alone are responsible for the success of our companies.  That’s why the average CEO of an S&P 500 company received a 13.9 percent raise in 2011 compensation—to an astounding $12.94 million.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires public companies to disclose CEO-to-worker pay ratios. Disclosing these pay ratios may shame companies into stopping runaway CEO pay. Academic studies show that large pay disparities within a company can hurt employee teamwork, productivity, loyalty and motivation. The impact of high levels of CEO pay on employee morale is particularly important in today’s weak economy, when workers are being asked to do more for less.

The interests of the 1% does not outweigh the views of working families who feel CEO pay has run amok.

Click here now to send a quick e-mail to the SEC and demand that the CEO-to-worker pay ratio disclosure rule be issued ASAP. If you’re a shareowner concerned about these issues, you should also consider joining the United States Proxy Exchange, a “chamber of commerce” for retail shareowners. For less than $50 a year, you’ll get critical news and helpful guidance to increase the value of your companies through enhanced corporate governance.

Thank you for acting to help us rein in out-of-control CEO pay and standing up for working families. Thanks to Brandon Rees of the Office of Investment, AFL-CIO for setting up this semi-automated comment link to urge the rulemaking by the SEC.

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