It’s no secret that the gap between CEO pay and workers’ salaries and wages in the US is obscenely wide. There is more income disparity between those at the top and those at the bottom in this country than in any other part of the industrialized world – and while CEO pay has been skyrocketing, worker compensation has remained stagnant for years. However, getting detailed information on the actual numbers has been difficult. This week, the Securities & Exchange Commission (SEC) issued a rule that requires a corporation to calculate average worker compensation, then issue a public statement comparing that figure to chief executive pay.
CEO compensation is complex, and goes beyond the actual paycheck. Such compensation also includes stock options, bonuses and benefits, as well as other “perks” that, while having a monetary value, do not necessarily take the form of cash payments. Nonetheless, even a CEO’s salary by itself is many, many times that of the average worker. According Heather Corzo, director of the AFL-CIO’s Office of Investment, the new SEC rule is designed to make company shareholders aware of how people are being paid. In an interview on National Public Radio, Ms. Corzo added that such information will “be important…for the general public as we think about what executive compensation practices…and how that relates to income inequality and raising wages.”
The rule comes at a time when income inequality is emerging as the top issue of the 2016 elections. In the US, average CEO compensation in 2014 was over 373 times that of the average worker – up from 354 only two years earlier. This year, Doug McMillon, CEO of Walmart, was handed over $19.3 million in salary and compensation – 536 times what an average worker earns. That comes out to well over $9,000 an hour. In contrast, most Walmart employees receive approximately $9 an hour.
Some major corporations have been bucking this trend. For example, Costco CEO W. Craig Jelinek capped his own salary at $500,000 a year in order to be able to pay employees over $20 an hour. Jelinek says, “I just think people need to make a living wage with health benefits…it also puts more money back into the economy and creates a healthier country. It’s really that simple.”
Compare that statement to that of Walmart founder Sam Walton: “No matter how you slice it in the retail business, payroll is one of the most crucial things you have to fight to maintain your profit margin.”
Small wonder that big business interests want to keep salary information difficult to access. Opponents, led by the US Chamber of Commerce, have vowed to fight the new SEC rule. They claim that such a rule would burden businesses with unnecessary costs. Even members of the SEC are divided on the issue. The rule was approved by a vote of 3 to 2. Daniel Gallagher, SEC commissioner, calls it a “nakedly political rule” designed to “affect social change desired by ideologues and special interest groups.”
Like it or not, the issue of income inequality is not going away, and will remain in the spotlight between now and November 2016. Supporters of the rule hope that it will bring even more attention to the issue and its effects on the economy and society in general – while at the same time, force corporate America to reconsider the ways in which employees are compensated for their labors.