CEO Pay Ratio Passes, But Fight Will Continue

Why is a bill that requires disclosing pay ratios so "expensive to implement" and how would the information paint a false picture? Public companies should have payroll information available, and qualifying statements could prevent false pictures from forming in anyone's heads.

So while I'm glad the bill passed as a matter of principle, I doubt the rule will make CEO/worker pay ratios any more fair.

Andy Borowitz explains my reservations in his recent report. He writes,

NEW YORK (The Borowitz Report)—Late in the afternoon on Tuesday, Fox News Channel issued what it called a definitive list of the top ten narcissists highest CEO/workers' pay ratios in America.

The ten narcissists CEOs, winnowed down from a longer list of seventeen, will be presented to the nation in a special prime-time broadcast Thursday night.

Almost immediately after Fox released the list there was an outcry over its choices, as the seven narcissists runners up who were omitted complained that they were easily as egotistical and self absorbed over compensated as those who made the cut.

The president of Fox News, Roger Ailes, called the criticism “understandable, coming from narcissists overpaid CEOs,” but acknowledged that choosing the top ten narcissists highest CEO/workers' pay ratios in America was ultimately a matter of opinion about how to value options and bonuses.

“At the end of the day, whether these ten deserved to be on the list is open to argument,” he said. “Except Trump David M. Zaslav, of course.”

CEO Pay Ratio Passes, But Fight Will Continue

By Polina Tikhonova at ValueWalk.

A long awaited CEO pay ratio rule was approved by the Securities and Exchange Commission this morning. The rule requires public companies to list their chief executives total annual compensation as a ratio of their worker’s median pay.

Five years later, CEO pay ratio a reality

Five years after Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Acts, which mandated the CEO pay ratio rule, and two years after the SEC formally proposed the requirement, the act was passed by a 3-2 vote along political lines. Two Republicans on the panel, outgoing commissioner Daniel Gallagher and Michael Piwowar, voted against the bill, citing the influence of labor unions as a concern.

Gallagher said the rule will be used in “naming and shaming” highly paid CEOs. SEC Chair Mary Jo White, however, noted it wasn’t the SEC’s job to legislate. “It is the law, and we are required to carry it out,” she said.

“The Commission and its staff went to great lengths to consider all viewpoints, including how best to stay faithful to the values of the rule, while mitigating the potential challenges faced by issuers in its implementation,” outgoing Democratic commissioner Luis Aguilar said in a statement. The SEC received over 280,000 comments in support of the issue.

Financial Serivces Committee Chair Hensarling not happy, vows fight

Financial Services Committee Chairman Jeb Hensarling (R-TX) wasn’t pleased with today’s action, as he and other Republicans have been attacking the legitimacy of the Dodd Frank act itself. “Chair White prioritized this rulemaking to appease those that want a government regulator-controlled economy,” he said in a statement. “Instead of focusing on rules that would protect investors or facilitate capital formation for small and medium-sized businesses, Dodd-Frank decided to mandate disclosure rules that burden every U.S. public company that cost the economy billions of dollars without any material benefit.”

Supporters claim public and investor knowledge regarding pay disparities will help reign in excessive CEO compensation, while opponents say the pay ratio is expensive to implement and paints a false picture.

The battle is not over the issue, as challenges both in court and in the legislative branch of government are expected. “This fall, the committee will consider legislation to repeal this provision, H.R. 414," Hensarling said.

Sign up for ValueWalk's free newsletter here.