New York Times
The lawyers say that the ratio would be unfairly complex to calculate and could encourage false comparisons. But the real problem is that C.E.O.’s and corporate boards would have to justify — to shareholders, employees and the public — what are sure to be some very large gaps between pay at the top and pay for everyone else.
Federal filings already tell investors how much top executives make. The median salary of a Standard & Poor’s 500 chief executive last year was $1.025 million, and the median total pay package including bonuses and nonsalary income was $7.5 million, according to Equilar, an executive compensation research firm. The median pay of private-sector workers in the United States was about $30,000 in 2008, the most recent year of data. With benefits added in, that comes to roughly $36,000.
Without company-specific data, however, it is impossible to measure and judge the effect of pay structures on companies and the broader economy. It is clear that C.E.O. pay has skyrocketed while workers’ pay has stagnated; it is also clear that skewed pay and rising income inequality correlate to bubbles and crashes.
How does the pay gap between the boss and the workers figure into performance? Are companies efficiently providing goods and services or are they being run for the enrichment of the few? Disclosure of the gap could help provide answers and in the process, help investors, policy makers and the public understand the forces that are shaping business and the economy.
It is up to the Securities and Exchange Commission to develop rules to calculate employees’ total compensation, including whether to include workers outside the United States. The best approach would be to measure the pay gap both against the global work force and the American work force, because company performance — and the impact of corporate decisions on investors and the economy — are tied to each number.
Corporate opponents of the law insist that pay-gap disclosures would be misleading. A company that outsources its low-wage work, for example, could have a smaller gap than a company that employs low-wage workers, even though the outsourcer is not necessarily a better-run company. That misses the point. The point is to calculate, disclose and explain the gaps as they exist for the way a company does business.