NYT: CEOs Overpaid?
Overpaid? Or Worth Every Penny?
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.