Today at a Senate Banking Committee hearing, U.S. Senator Robert Menendez (D-NJ) reiterated the need for publically-listed companies to disclose the amount of its CEO pay, the amount of the median company worker pay, and the ratio of the two in their annual U.S. Securities and Exchange Commission (SEC) filing.
"It's evident that excessive compensation schemes provided part of the fuel for the financial crash. And by requiring companies to disclose just how much, and how skewed, CEO pay can be, there's a strong possibility they'll think more about their compensation structures," said Menendez who sits on the Senate Banking and Finance committees. "A company's treatment of their average workers is not just a reflection of their corporate values, but is also material information for investors. So, it's time Wall Street shine a light on their CEO pay and it's past time for the SEC to make this rulemaking a priority."
Senator Menendez drafted a provision requiring disclosure of this information included as Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While Wall Street Reform was passed nearly a year and a half ago, to date, the SEC has failed to act on this required rulemaking. While there is no deadline by which the rule must be finalized, some companies are against it claiming it increases compliance costs and is overly burdensome.
"Income inequality is a real, growing concern in our nation, as it should be. We have middle class Americans that have gone years without seeing a raise, while CEO pay is soaring," Menendez added. "And the excuse used by the industry that this rule is too costly and too burdensome for companies just doesn't pass muster when their CEOs are raking in multi-million dollar bonuses. What's too costly here are the big paydays for CEOs. And the burden is falling on workers with stagnant wages."
Over the last decade, median family income fell for the first time since the Great Depression. While comprehensive data will not be available until Senator Menendez's provision takes effect, there is no question that CEO pay is soaring compared to that of average workers. In 2010, large company CEO pay had skyrocketed to 319 times the median worker's pay, according to the Bureau of Labor Statistics.
Menendez has written two letters (January 2011 and March 2012) to the SEC urging strong and quick implementation of the rule and, today, Menendez was able to directly ask Mary Jo White about it at her nomination hearing to chair the SEC.