SEC Proposes CEO Pay Ratio Rule

SEC Proposes CEO Pay Ratio Rule

The SEC has unveiled a new proposal that would require U.S. corporations to reveal how the pay of their CEOs compares to that of average workers in their companies. They say such numbers would help shareholders to better ascertain whether CEO pay is matching up with CEO performance. Not surprisingly, the companies and their paid stooges at U.S. Chamber of Commerce, among others, oppose the move, stating that it would be too costly for the poor, sad, overworked companies to compile such data. Right.

“As owners of public companies, shareholders have the right to know whether CEO pay multiples reflect CEO performance,” said SEC Democratic Commissioner Luis Aguilar in prepared remarks. “Pay ratio disclosure can provide a valuable new perspective for executive compensation decisions,” he added. It should be pointed out that this rule is mandated by the 2010 Dodd-Frank Wall Street reform law and it comes just after the fifth anniversary of the collapse of Lehman Brothers and the U.S. financial meltdown.

The real reason the rule is being opposed is simple embarrassment and fear. The old boy CEO network likes to keep a low profile and if the average worker knew that their CEO earned 20 or 50 or 100 times what they did, it would cause trouble. If shareholders knew how much of a company’s profits were being funnelled directly into a CEO’s already bulging pockets, then they would be far less likely to approve future executive compensation packages (also known as licenses to steal). I certainly hope the SEC passes this proposal and then strongly enforces it. It’s far past time to shine a light on the ongoing crime that is executive compensation.

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