CEO PAY GOES UP Overpaid? Or Worth Every Penny?

CEO PAY GOES UP

Overpaid? Or Worth Every Penny?

By THE EDITORIAL BOARD

Published: July 13, 2013

Major corporate filings for 2012 have now provided an updated portrait of

executive pay. The median compensation of chief executives at 200 of the

nation’s biggest public companies came in at $15.1 million last year, a 16

percent jump from 2011, according to Equilar, the executive compensation

analysis firm. The pay packages — including salary, bonus, benefits, stock

and option grants — ranged from $96.2 million at Oracle to $11.1 million

at General Motors.

Is that excessive? One way to answer that question would be to look at

the pay gap, the ratio of the pay of the chief executive to that of the

company’s employees. But nobody really knows what the gaps are. Three

years after passage of the Dodd-Frank financial reform law requiring companies

to disclose the gaps, the Securities and Exchange Commission has not even

proposed rules to put the provision into effect. Nor has Congress or the

administration pressed the agency to get on with the job.

The pay gap information has many potential uses. It could help

investors judge the effect of a company’s pay structure on productivity,

efficiency, innovation and other aspects of work-force performance. It

could also help consumers determine whether companies are solid

corporate citizens or sources of enrichment of the few. And it could help

economists and policy makers detect emerging asset bubbles and

impending crashes, which generally correlate with rising income

disparities.

But corporations don’t want any of that. To hear them tell it,

computing the pay gap is too hard. Nonsense. The real obstacle is that

many chief executives do not want to have to defend what are sure to

be some indefensibly large gaps.

There is no doubt that the gaps are huge. Using government data

on worker pay, the Economic Policy Institute has calculated that the

ratio of C.E.O. pay to employee pay was 273 to 1 in 2012, or

202 to 1, depending on how stock options were accounted for. Either

way, that is far higher than it has been for most of the past 50 years.

What remains unknown, however, is which specific corporations are

driving the gaps. That is the information investors and consumers

need to fight effectively against executive pay packages that are

unjustifiable and disadvantageous.

Corporate executives also resisted pay disclosure when the Securities

Exchange Act of 1934 first required public companies to report C.E.O.

compensation. That law helped to establish corporate norms that long

endured, in which executive pay was a more modest multiple of employee

pay. Those norms, weakened through time, could be reinforced with pay

gap disclosure, but only if politicians and regulators find the courage to

follow through.

http://www.nytimes.com/2013/07/14/opinion/sunday/overpaid-or-worth-every-penny.html?hpw&_r=1&

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