Shining a Light on Runaway CEO Pay

The Securities and Exchange Commission has finalized a new rule that require public companies to make public how much their CEOs are paid compared to rank-and-file workers.

It's been a long time coming.

Five years ago, the Dodd-Frank financial reform law said the SEC should require corporations to calculate this ratio. The new rule will go into effect in 2017 – despite the complaints of the U.S. Chamber of Commerce and corporate lobbying groups.

It's an important first step towards reining in runaway CEO pay. This transparency will force shareholders to think twice before approving outsized pay packages, and it will help push back against the practice of justifying sky-high executive pay by simply comparing a CEO's pay with that of others in the same industry.

In 1965, CEOs of America's largest corporations made, on average, 20 times the pay of average workers. Now, the ratio is 373 to 1. 

Last year, CEOs of the S&P 500 Index companies received, on average, $13.5 million in total compensation.

Robert Reich, former Labor Secretary under President Bill Clinton, points out that CEOs haven't done anything special to earn these movie star-level salaries. The stock market surge, coupled with stronger intellectual-property rights and weaker antitrust enforcement, really is responsible for rising corporate profits. In particular, the offshoring and outsourcing of American jobs has helped send stock prices soaring at the expense of U.S. working families and our standard of living.

Read more here.