Big companies and interest groups that represent them are resisting a piece of the Dodd-Frank Wall Street Reform Act that is meant to help rein in executive compensation, even as pay for chief executives skyrockets and is increasingly untethered from company performance.
The rule, a draft of which is set to be issued at the end of the month, would force companies to disclose the gap between the pay of their CEOs and average employees. Over the last 30 years, CEO pay has grown 127 times faster than worker pay, and the average CEO at America’s largest companies now makes $14.5 million. CEO pay grew twice as fast as workers’ wages in 2011 alone.
Despite those alarming disparities, business groups and companies are lining up to oppose the rule, saying calculating such a disparity would be too hard and “would make them easy targets for CEO-pay critics,” the Wall Street Journal reports:
Companies say they have a rough sense of their internal pay ratios, but they argue that their global workforces and varied payroll systems make calculating the median cumbersome, if not virtually impossible. What’s more, they say, disclosing pay ratios would make them easy targets for CEO-pay critics.
“The ratio is not going to be a meaningful way to help investors but will be used as a political tool to attack companies,” says David Hirschmann, president of the U.S. Chamber of Commerce’s Center for Capital Markets, which opposes the measure.
But other companies that tie executive pay to the pay of average workers have pushed back on the criticism. Mark Ehrnstein, a vice president at Whole Foods, told the Wall Street Journal that tracking pay “takes a few days” and isn’t as cumbersome as business groups allege. Whole Foods tracks pay to ensure that no employee makes more than 19 times the median company salary. By comparison, the average American CEO now makes 380 times more than the average worker.