March 17, 2017
I advocate prompt adoption of the pay ratio disclosure rule. The information required to be disclosed under this rule may not be important to professional or institutional investors, but it is important to a significant number of individual investors who have serious concerns not only about the cost to the companies in which they consider investing of excessive CEO compensation as it would affect their investment returns, but also about the morality of pay inequity and its effect on the socioeconomic fabric of the nation as a whole.
I have read some of the comments submitted by corporate officers who, not at all surprisingly, oppose the rule, largely on the stated grounds of compliance burden and expense. Based on my 45 years' experience in two careers, first as a securities lawyer and later as CEO of a small privately held corporation, I believe that such burdens and costs are being greatly exaggerated. The disclosure required by the rule is a simple ratio, one number divided by another. The first number (CEO compensation) is already known or must be calculated for other disclosure requirements anyway. The divisor (median employee compensation) is simple enough to obtain. Any company with a decent, reasonably modern IT system and HR database should be able to calculate it in minutes, with a few keystrokes on a computer. There is nothing difficult or expensive about this.
While it is easy enough to understand the real reasons why the executives of publicly held companies do not want to disclose information that might result in some public blow-back, the objections being stated in the opposition comments are, frankly, nonsense.