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Shoving CEOs under an Online Microscope

Research & Commentary
April 22, 2012

by Sam Pizzigati

A new labor report reinforces the case for more transparency on the enormous gap between what CEOs take home and what they pay their workers.

The AFL-CIO, America’s national trade union center, has just published its 15th edition of Executive PayWatch, the Web site that annually tallies just how much total compensation America’s top-tier CEOs are grabbing.

AFL-CIO researchers don’t, of course, have the executive pay data scene all to themselves. A variety of business groups and major media outlets also release annual corporate chief executive pay tallies.

But PayWatch has always stood out in the annual spring CEO pay report crowd. Other CEO pay compilers are essentially just keeping score. The AFL-CIO, with Executive PayWatch, is endeavoring to upend the entire CEO pay status quo.

The rules of this status quo currently stand rigged against workers — and shareholders upset about the plundering of corporate resources that excessive CEO pay represents. The annual updates PayWatch releases regularly spotlight the rule changes needed to put an end to this plundering.

Two years ago, the AFL-CIO’s relentless push for these rule changes helped enact some important new checks on excessive executive pay. The Dodd-Frank Wall Street Reform and Consumer Protection Act that became law the summer before last gives shareholders the right to cast advisory votes on CEO pay plans.

This “say on pay,” AFL-CIO president Richard Trumka told reporters last week at the unveiling of the new PayWatch, is starting to have an impact. Shareholders, he noted, “are beginning to protest.”[pullquote]The SEC has not yet written the regulations necessary to put the new Dodd-Frank pay ratio disclosure mandate into effect.[/pullquote]

And the ranks of protestors would no doubt expand considerably, the new PayWatch contends, if the Securities and Exchange Commission, the federal agency that watchdogs Wall Street, stopped dragging its feet on Dodd-Frank’s most promising check on CEO pay excess, mandatory pay ratio disclosure.

Dodd-Frank’s disclosure mandate requires all publicly traded corporations to annually reveal the ratio between what they pay their top executive and what they pay their median — most typical — workers.

The SEC has not yet written the regulations necessary to put this new pay ratio disclosure mandate into effect, mainly because corporations have unleashed a fearsome lobbying campaign against it. Corporate heavyweights are pushing Congress to repeal the mandate and, in the meantime, doing everything they can to gum up the works and delay the SEC regulation-writing process.

The Dodd-Frank pay disclosure mandate, the new PayWatch notes, has become more “needed now” than ever. Big-time CEO pay outpaced average worker pay by 380 times in 2011, the stats show, up from 343 times in 2010.

The gap at many individual corporations runs much higher than this overall 380-times average. But we can’t now identify which specific corporations sport the widest pay gaps between CEOs and workers since corporations — until the Dodd-Frank disclosure mandate goes into effect — don’t have to disclose how much they pay their most typical workers.

The SEC could have — and should have — written the rules necessary to put the Dodd-Frank pay ratio disclosure mandate into effect in time for this spring’s annual corporate meetings. The agency flubbed that deadline.[pullquote]The CEO-worker gap at many individual corporations runs much higher than the national 380-times average.[/pullquote]

The new PayWatch site is aiming to prevent a repeat of that flubbing. Visitors to the site can link to an online tool that makes it easy to send a message that urges the SEC “to force CEO-to-worker pay ratio disclosure.”

Take a look — and share PayWatch with friends, colleagues, and co-workers. They can use a pay comparison tool on the site to see how their personal take-home stacks up against the fortunes their CEOs are pulling down. They can even see how the managers of the mutual funds where their investments are sitting are voting on the executive pay plans that come up for say-on-pay votes.

These mutual fund decisions matter enormously. Mutual funds hold just under a quarter of all U.S. corporate stock. The managers of these funds generally vote the shares they hold exactly how CEOs want them to vote — and the Americans whose money these fund managers invest have no clue to how they’re voting.

The new PayWatch dramatically spills the beans. The site reveals how the 40 biggest mutual funds are voting on shareholder initiatives to discourage excessive executive pay — and offers an easy-to-use interactive tool that mutual fund investors can use to express their displeasure with CEO-friendly fund managers.

Sign up for To MuchIn sum, the new PayWatch rates as the most useful PayWatch edition yet. The pals of America’s CEOs who run mutual funds won’t like it. You will.

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