Editorials

CEO pay gap is just what we feared

The Securities and Exchange Commission has adopted a rule compelling public companies to report the ratio between their chief executive’s annual compensation and the median pay of employees.
The Securities and Exchange Commission has adopted a rule compelling public companies to report the ratio between their chief executive’s annual compensation and the median pay of employees. The Associated Press

It started as a rallying cry from the grassroots Occupy Wall Street movement, at a time of runaway executive compensation and dwindling incomes among the middle class and the poor: “We are the 99 percent!”

Now it’s an issue in the 2016 presidential race, particularly among those vying for the Democratic nomination. But who exactly are the 1 percent, that tiny pool of rich Americans who keep getting richer? And how do they really stack up to the rest of us on the payroll?

Thanks to the Securities and Exchange Commission, we’re starting to get details. And they’re not pretty.

Last week, the agency finally approved a provision of the 2010 Dodd-Frank Act that requires companies to disclose the wage gap between top executives and rank-and-file employees. The vote was 3-2, with the SEC’s two Republican commissioners rejecting it.

The “CEO pay-ratio rule” has been a source of contention for years. Corporate lobbying groups did everything they could to block its implementation. The U.S. Chamber of Commerce, in particular, is still miffed about the way things went down.

It’s not hard to see why.

The statistics that have emerged are appalling proof that many corporate leaders remain stubbornly tone deaf, in spite of the financial meltdown and ensuing recession. More than most of us realized, greed is still good.

We now know that the average CEO of a company listed on the Standard & Poor’s 500 index gets paid 216 times more than the median pay of employees.

We also know that, according to an analysis from USA Today, nine chief executives, including David Zaslav of Discovery Communications, Steven Ells and Montgomery Moran of Chipotle, and Larry Merlo of CVS Health were paid 800 times or more on average than their workers.

That’s tough to rationalize, but it’s about time corporate leaders were put in the hot seat.

In large swaths of America, poverty is on the rise. We’re living in a time when even solidly middle-class American families are struggling to make ends meet. Income inequality is no longer something that only Occupy protesters shout about in the streets. It’s a full-fledged, mainstream issue stoked by presidential candidates Hillary Clinton and Bernie Sanders, among others.

Meanwhile, corporations have fought mightily against almost every attempt to raise the minimum wage, even though several cities have done so anyway or, like Sacramento, are considering it. Wage growth remains at its lowest level in decades and corporate profits are at their highest in that same time period, riding a wave of skyrocketing stock prices.

That’s not to say all CEOs are channeling Gordon Gekko. Larry Page of Google, John Mackey of Whole Foods Market and Kosta Kartsotis of watchmaker Fossil all make less than the median wage of their employees. But such farsighted executives are few and far between.

Overall, the Dodd-Frank Act uncovered precisely what we feared we would find and precisely what corporations have been trying so hard to hide. The “CEO pay-ratio rule” isn’t perfect and almost certainly will be challenged in court. But it rightly offers the general public a much-needed glimpse into the inner workings of corporate America.

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