SEC Urged To Enact Dodd-Frank Rule On Executive Pay
You know your boss makes more than you. But do you know how much more?
The architects of the Dodd-Frank act would like you to know. That's why they included a measure in their landmark financial-regulatory package that requires CEOs to reveal how much they get paid, compared to the median earners in their companies.
In an age where income growth is accelerating far faster for the wealthy than for anyone else, and where the widening divide between rich and poor has brought people to the streets in protest, we're betting that highly-compensated executives wouldn't want to advertise the fact that their earnings are many, many multiples of what their employees make. The CEO of Verizon earns 613 times as much ($36.75 million in cash compensation) as an employee in the middle of that company's pay scale. The head of CVS out-earns ($16.56 million) his mid-level employees by a factor of 456.
Lawmakers are upping the pressure on the Securities and Exchange Commission to implement the CEO pay disclosure rule.
In letters to the SEC penned last week, members of Congress -- including Senator Robert Menendez, who wrote the pay disclosure rule -- urged them to put the rule into practice.
The disclosure rule is a relatively little-known aspect of the Dodd-Frank act, which was passed in the aftermath of the financial crisis. Other measures in the raft of legislation have received more national notice, like the so-called Volcker rule, which aims to prevent banks from trading with their own money, or the watchdog agency known as the Consumer Financial Protection Bureau, which Dodd-Frank established.
But many major corporations are paying close attention to the measure on CEO pay. A business group representing more than 80 big companies was lobbying against the disclosure rule last year, according to The Washington Post.
And in January, some two dozen business groups implored SEC chair Mary Schapiro to consider what they called "the potential issues and unintended consequences" of the pay disclosure rule -- arguing that it would be costly and time-consuming for businesses to crunch the necessary numbers.
Some companies already set limits on the amount their CEOs can make, although such pay ceilings have a way of creeping higher. Executive salaries at Whole Foods Market Inc. used to be set at eight times the average worker's paycheck -- a figure that later rose to 14 times the average, then 19 times. The ice cream company Ben & Jerry's underwent a similar progression, with executive pay growing from five times the salary of the lowest-paid employee to seven times to 17 times, to an amount that is undisclosed today.
James Sinegal, the former CEO of Costco, had a self-imposed pay cap of $350,000 for several years, but he stepped down earlier in January and was replaced by Craig Jelinek, who now earns a salary of $650,000.
It's not clear when or how the SEC plans to take action on the pay disclosure rule. Schapiro told the House appropriations committee last week that the SEC is trying to figure out the logistics of implementation, according to ABC News.
The pay disclosure rule does not have a deadline attached, but even if it did, it might not make a difference. Regulators have already missed some three-fourths of deadlines so far for putting the Dodd-Frank rules into place.
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The Huffington Post Alexander Eichler First Posted: 03/14/2012 1:11 pm Updated: 03/14/2012 1:14 pm