In August 2015, the U.S. Securities and Exchange commissioners voted 3-2 in favor of a new rule that requires public companies to report their CEO’s total annual compensation as a ratio to their employees’ median pay. The SEC didn’t rush into this decision. Far from it. The vote came five years after the passage of the Dodd-Frank Act, which mandated the rule, and two years (and 280,000 public comments!) after the SEC announced that it would consider complying with that mandate. Moreover, the rule has plenty of loopholes. For instance, it doesn’t apply to companies with annual revenues below US$1 billion. And it doesn’t take effect until 2017.
The delay and controversy were blamed on a number of plausible causes: that it was a ploy by unions to gain negotiating leverage; that it didn’t measure anything of consequence; that it would cost too much to implement. But it’s hard not to believe that the real reason corporate lobbyists and leaders weren’t enthusiastic about a swift adoption of this rule was fear. As the Economic Policy Institute has shown, the ratio of CEO pay in major companies to the median pay of their employees is somewhere around 300:1. Formally reporting such ratios in stark terms would likely add fuel to the already roaring fire surrounding economic inequality. In 2014, according to a Pew Research Center survey, the people of Europe and the U.S. pegged economic inequality as “the greatest danger to the world.” (In 2015, inequality dropped a ranking or so because ISIS took the top spot.)
