| WASHINGTON, Sept 18
WASHINGTON, Sept 18 U.S. corporations will need
to disclose how their chief executive's paycheck compares to
that of their average worker under a proposal set to be unveiled
on Wednesday by the U.S. Securities and Exchange Commission.
The SEC's CEO pay ratio rule is championed by unions and
labor advocates who say the disclosures will help investors
identify whether a company's compensation model is too
But companies and business organizations such as the U.S.
Chamber of Commerce, as well as, the Center on Executive
Compensation, which represents human resources executives, have
vehemently opposed the measure, saying it is too costly to
compile the data and will not be useful for investors.
They have urged the SEC to scale it back, possibly by
allowing companies with global offices to compile the median
annual pay of average workers using compensation data from only
their U.S.-based employees.
The proposal is one of two major outstanding regulations
mandated by the 2010 Dodd-Frank Wall Street reform law that the
SEC plans to tackle at Wednesday's public meeting.
In addition to the CEO pay ratio plan, the SEC is expected
to adopt a reform that will allow it to oversee financial
advisers to cities, counties and other municipal entities that
sell public debt or manage public money.
The rule will require advisers to register with the SEC and
be held to a "fiduciary" standard, or ensure they act in the
best interest of customers.
The primary complaint against the municipal adviser rule
proposal was that it was drafted too broadly, ensnaring too many
people, such as volunteers or board members, in cumbersome
The final rule is expected to have a narrower definition of
who qualifies as an adviser, but it is also expected to span
hundreds of pages. Once enacted, the federal government will be
able to give professional qualification licensing exams and
extend regulations that only broker-dealers currently must
follow to advisers, including limits on gifts and gratuities.
The SEC's CEO pay-ratio proposal comes on the heels of the
fifth anniversary of the collapse of investment banking giant
Lehman Brothers and the country's financial meltdown.
The 2007-2009 financial crisis led to widespread public
outrage over the lavish compensation of bank CEOS, especially
after the government swooped in to rescue the sector.
A new report by the Institute for Policy Studies which
analyzed data about top CEO earners over a 20-year period found
that chief executives whose firms collapsed or received
government bailouts have held 112 of the 500 top pay leader
And yet, even after Wall Street reforms were passed, the
report said the pay gap between CEOS and the average American
worker has grown from 195-1 in 1993 to 354-1 in 2012.
The CEO pay-ratio provision, which was tucked into the law
by New Jersey Democratic Senator Robert Menendez, is one short
paragraph in the lengthy Dodd-Frank law. But its backers say it
is critical information for the marketplace.
"This rule is really, really important to investors because
it will shine a light on the pay ladder within a company," said
Vineeta Anand, the chief research analyst at the AFL-CIO Office
"When the gap between the CEO and the mid-ranking employee
is very steep, it can have a negative impact on employee morale,
on productivity and cause high turnover. All of those things
affect a company's bottom line."
But critics strongly object to a pay ratio rule at all, and
are urging the SEC to keep its costs minimal.
Tim Bartl, the president of the Center on Executive
Compensation, said that over the past three years, shareholder
support for proposals to require companies to disclose a CEO to
worker pay ratio has been extremely low.
Of the 14 proposals, Bartl said the average vote against
them was 93.5 percent.
"When you boil it down, the pay ratio disclosures is not
information that investors broadly speaking find useful," he
said. "There is no business purpose for the companies to collect
data in that way."