Last week, the Securities and Exchange Commission (SEC) released a rule requiring companies to disclose the CEO-to-worker pay ratio. Despite objections by many corporations, the rule covers all employees including seasonal, international, and part-time workers. The SEC provides companies the option of using the entire workforce or a representative sample in the calculation.
There will now be a 60-day comment period. The SEC voted for the rule 3-2, with the two Republican Commissioners who voted against the proposal calling it a special interest provision and proclaiming “shame on the SEC.”
Proponents of the rule argue that it will give shareholders and other stakeholders a clear line of sight into human capital management and worker pay. For instance, CalPERS, the California State Pension Plan, has issued a release, welcoming the rule as a valuable tool which will “help shareholders to keep management accountable” and “shed light on an element of pay which is currently shrouded from view.” John Liu, the NYC Comptroller, stated that the rule would allow “shareowners to make informed decisions about compensation and may rein in excessive corporate practices.”
Numerous news outlets have covered this story, including the Wall Street Journal, Bloomberg, and the New York Times. Things are only going to get more interesting from here on out.
From my point of view, and quoting Justice Brandeis, “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”
This article was originally printed on Workplace Prog Blog on September 23, 2013. Reprinted with permission.
About the Author: Paul Secunda is an associate professor of law at Marquette University Law School. Professor Secunda is the author of nearly three dozen books, treatises, articles, and shorter writings. He co-authored the treatise Understanding Employment Law and the case book Global Issues in Employee Benefits Law. Professor Secunda is a frequent commentator on labor and employment law issues in the national media. He co-edits with Rick Bales and Jeffrey Hirsch the Workplace Prof Blog, recently named one of the top law professor blogs in the country.
