fresh voices from the front lines of change







The CEO of a big company makes 1795 times what its clerks are making, and the company is now in trouble. Does it matter which company, when so many other companies are in a similar situation? There is a three-year-old law that requires companies to disclose to shareholders the ratio of CEO-to-worker pay, but the Obama administration isn’t implementing it.

The reason the government is not implementing the law is corruption: The people who are supposed to implement the law keep delaying, and then leave government to get huge checks from the very companies that want the already-passed law blocked from being implemented. No one is stepping in from above to make things happen. Meanwhile, Republicans in Congress are getting paid to do what they can to block implementation.

Law Says Disclose CEO Pay Ratio

Specifically, section 953(b) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act requires public companies to disclose the median annual total compensation of all employees, the total annual compensation of the chief executive officer, and the ratio of the median employee pay to the CEO’s pay. This law has been passed and has been on the books for three years. But three years later the administration still has not implemented it.

From last month’s CEO Pay And SEC Delay,

Something many people don’t know is that the Wall Street reform law was supposed to do this, but years later the regulations still have not been written! The SEC delays and delays, and then the head of the SEC leaves to take a high-paying job with a “bank consulting” firm.

There is a new Chair of the SEC. Will SEC Chair Mary Jo White get this law implemented, or not?

The Story

A recent Bloomberg story by Elliot Blair Smith & Phil Kuntz looks at the CEO-pay law and what is blocking implementation. Bloomberg: CEO Pay 1,795-to-1 Multiple of Wages Skirts U.S. Law begins by looking at the case of JC Penny CEO Ron Johnson,

Former fashion jewelry saleswoman Rebecca Gonzales and former Chief Executive Officer Ron Johnson have one thing in common: J.C. Penney Co. (JCP) no longer employs either.

The similarity ends there. Johnson, 54, got a compensation package worth 1,795 times the average wage and benefits of a U.S. department store worker when he was hired in November 2011, according to data compiled by Bloomberg. Gonzales’s hourly wage was $8.30 that year.

Across the Standard & Poor’s 500 Index of companies, the average multiple of CEO compensation to that of rank-and-file workers is 204, up 20 percent since 2009, the data show. The numbers are based on industry-specific estimates for worker compensation.

Almost three years after Congress ordered public companies to reveal actual CEO-to-worker pay ratios under the Dodd-Frank law, the numbers remain unknown.

So how is this law being blocked? According to Bloomberg story a powerful “Washington-based non-profit called the HR Policy Association, which represents top human resources executives at about 335 large corporations” is leading the charge.

The group has brand names behind it: 17 companies on HR Policy’s board of directors have CEO pay ratios in the top 20 percent of S&P 500 corporations, Bloomberg data show. They include General Electric Co. (GE), with a ratio of 491; McDonald’s Corp. (MCD), at 351; and AT&T Inc. (T), at 339.

How did Bloomberg arrive at these multiples, even though the law is being blocked?

These multiples are based on CEO pay for either the fiscal year ending in 2011 or 2012, as disclosed in the companies’ most recent filings before noon on March 26. Because most companies don’t disclose their average workers’ pay, Bloomberg used U.S. government data on worker compensation by industry. The average ratio for the S&P 500 companies is up from 170 in 2009, when the financial crisis reduced many compensation packages. Estimates by academics and trade-union groups put the number at 20-to-1 in the 1950s, rising to 42-to-1 in 1980 and 120-to-1 by 2000.

And what is going on to block the law? Well, as mentioned above the last Chair of the agency delayed and delayed, and then left to take a high-paying job with a firm that makes its money by selling influence. (See CEO Pay And SEC Delay.) We are waiting to see if the new Chair will implement the law. From the Bloomberg story,

The SEC, which has so far written 39 of 94 rules called for under Dodd-Frank, has no deadline for completing the pay-ratio provision. In February, Commissioner Luis Aguilar suggested that companies voluntarily disclose their ratios until the agency can develop its rule.

… Bartl, at the compensation center, responded with a letter asking Aguilar to “retract” his statement.

SEC Chairman Mary Jo White, who took office this month, and the three other commissioners declined to comment.

The Bloomberg also tells the story of a low-wage JC Penny worker who was fired after being injured. Please go read.


In addition to regulators who sell out the public out by blocking implementation and then leaving to get huge paychecks from the lobbying firms whose mission they were assisting, Republicans in Congress are also working the case for the banks and big corporations.

Gary Rivlin at The Nation, How Wall Street Defanged Dodd-Frank describes the amazingly funded and powerful lobbying effort against the whole Dodd-Frank law — of which the CEO-pay rule is one part — and the inability of the Obama administration to overcome them. The result,

Three years after Dodd-Frank was passed, only 148 of the 398 rules requiring action by regulators have been finalized, and draft versions have yet to be submitted for half of the remainder. Sheila Bair, head of the Federal Deposit Insurance Corporation between 2006 and 2011, is among those outraged at that record. Bair, a lifelong Republican who was picked by President George W. Bush to head the FDIC, is unhappy that Congress wrote such an overly complex law. She also wishes that the regulators would act more boldly. But the main culprit, she says, is the resistance to reform posed by an industry with enormous firepower. “At the end of the day,” Bair says, “the regulators are outgunned.”

How are Republicans helping block regulations? From Rivlin’s story,

Wall Street’s primary beachhead for fighting Dodd-Frank has been the House Committee on Financial Services, chaired until recently by the Wall Street–friendly Spencer Bachus. “Regulators are there to serve the banks”: that’s what Bachus, an Alabama Republican, said shortly after it was announced that he would replace Barney Frank as the committee’s new chair at the start of 2011.


And the very first bill Republicans introduced after taking over the House in the 2010 midterms—HR 1—was a measure that would have cut the CFTC’s funding by one-third. “Anything we can do to slow down, deter or impede their ability to engage in this oppressive overregulation,” Senator McConnell explained in 2011, “would be good for our country.” Congress has summoned Gensler to testify on Capitol Hill fifty-one times over the past four years—more than a visit per month since his February 2009 confirmation hearing.

Rivlin’s story goes into the wider story of efforts to block the entire Dodd-Frank law and is worth reading in its entirety.

Will New SEC Head Implement The Law?

The question everyone is asking is, will the new head of the SEC go ahead and implement the SEC’s parts of the law, or not? This is an unusual question to ask — a law is passed why would anyone ask if the law will be enforced or not? But in our corrupt times and with the corrupt history of the people who are responsible for implementing and enforcing our country’s laws, unfortunately this is a question that people do ask.


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