December 1, 2013
I wholeheartedly support the proposed pay ratio disclosure since current pay practices for many CEOs are out of control and contribute to the increasing wealth inequality in our great nation. The reason that the corporate lobbyists are so up in arms over the proposed rule is because they know that there is a problem with CEO pay being out of control. Oftentimes, captive board members agree to practically all pay increases.
Some have argued that this ratio is irrelevant for shareholders. I counter this argument since the pay ratio would be one way to determine if the CEO is overcompensated, thus reducing net income and related return to investors. Furthermore, there are many socially responsible investors. This information would be of utmost interest to those investors.
Some have also argued that the burden of calculating the ratio is too great. This is a falsehood. Companies should have good bookkeeping systems and proper oversight of operations, which would enable the calculation of this ratio. Some have recommended that the SEC provide an additional two years before companies must include foreign workers in their pay ratio calculations. This is a reasonable suggestion since all workers, domestic and international, full-time and part-time, should be included in the calculation for fair comparability across companies.
Finally, the ratio should be disclosed since the exponentially increasing CEO pay is not only a social threat, but also an economic threat to the stability of our country. For example, every additional $1,000,000 in CEO compensation represents 20 workers that could be hired at a $50,000 salary. One only has to look to Detroit to see how devastating the elimination of well-paying industrial jobs in favor of corporate profits and CEO pay can be.