US SEC sup­ports rules that re­veal CEO/worker pay gap

The China Post - - INTERNATIONAL -

The U.S. mar­kets reg­u­la­tor on Wed­nes­day backed a rule re­quir­ing big com­pa­nies to dis­close the pay gap ra­tio be­tween chief ex­ec­u­tives and work­ers, amid ris­ing con­cerns about the na­tion’s in­come in­equal­ity.

Part of the Wall Street re­forms leg­is­la­tion, the Dodd-Frank Act, that be­came law in 2010, the new rule will take ef­fect in 2017 and ap­ply to a large num­ber of pub­licly traded com­pa­nies, de­spite ob­jec­tions from the busi­ness com­mu­nity.

The rule re­quires com­pa­nies to cal­cu­late and dis­close the ra­tio of the chief ex­ec­u­tive’s an­nual to­tal com­pen­sa­tion to the an­nual to­tal com­pen­sa­tion of the com­pany’s me­dian em­ployee.

“To say that the views on the pay ra­tio dis­clo­sure re­quire­ment are di­vided is an ob­vi­ous un­der­state­ment,” said Mary Jo White, chair of the U.S. Se­cu­ri­ties and Ex­change Com­mis­sion, ac­cord­ing to her pre­pared re­marks in open­ing an SEC meet­ing.

White, pre­sent­ing the SEC staff rec­om­men­da­tion call­ing for the rule’s endorsement, noted that the SEC had re­ceived more than 287,000 com­ment letters, with over 1,500 in­di­vid­ual letters and the rest form letters, since the Dodd-Frank Act was passed five years ago.

“The di­verse views ex­pressed by these com­menters re­flect that Congress tasked the Com­mis­sion with nav­i­gat­ing a highly di­vi­sive sub­ject — a boon or a bane, depend­ing on one’s per­spec­tive,” she said.

The com­pen­sa­tion pack­age for CEOs has sky­rock­eted over the past four decades: In 2013 the boss’s an­nual pay was 300 times higher than the typ­i­cal worker’s, com­pared with a 20 per­cent ra­tio in 1965, ac­cord­ing to a study by the Eco­nomic Pol­icy In­sti­tute, a Washington-based think tank.

White said the new rule pro­vides com­pa­nies with “sub­stan­tial flex­i­bil­ity” in cal­cu­lat­ing the pay ra­tio, by us­ing es­ti­mates and sam­pling to de­ter­mine the com­pen­sa­tion for the me­dian em­ployee. It also will al­low com­pa­nies to choose any date dur­ing the fi­nal three months of a firm’s fis­cal year to de­ter­mine the me­dian em­ployee.

De­spite the SEC-touted flex­i­bil­ity, the pow­er­ful U.S. Cham­ber of Com­merce con­demned the rule, call­ing it “a fa­vor to union lob­by­ists.”

“When dis­clo­sure is used to ad­vance spe­cial in­ter­est agen­das rather than pro­vide in­vestors with bet­ter in­for­ma­tion, it is a step in the wrong di­rec­tion,” the lead­ing U.S. busi­ness or­ga­ni­za­tion said in a state­ment.

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