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The AFL-CIO commends the U.S. Securities and Exchange Commission and Chairman Mary Jo White for fulfilling the agency’s responsibility under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to propose a rule requiring companies to disclose the ratio of total compensation between chief executive officers and the median pay of employees.
This pay data is important to investors because it shines a light on the company pay ladder for all employees, not just the pay of top executives that is already disclosed under current rules.
Disclosure of the median employee pay levels will help investors evaluate CEO pay levels in a broader context. In recent decades, CEO pay has increased dramatically relative to other employees. Thirty years ago, CEOs of the nation’s largest companies received 42 times the pay of rank-and-file workers. According to AFL-CIO’s Executive Paywatch site, in 2012, CEOs of companies in the S&P 500 index took home 354 times more pay than rank-and-file workers.
The simple fact is that large pay disparities between CEOs and their employees affect a company’s performance. When the CEO receives the lion’s share of compensation, employee productivity, morale and loyalty suffer. In contrast, reasonable CEO-to-worker pay ratios send a positive message to the workforce that the contributions of all employees are important to running a successful company.
Disclosure of CEO-to-worker pay ratios will give investors an important metric to analyze the compensation practices of companies. We look forward to commenting on the SEC's proposed rule, and we urge the SEC to quickly implement the final rule as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Contact: Josh Goldstein (202) 637-5018