Is there any excuse for the obscene amount of money we pay the heads of our businesses and our money industry in this country? Is their value to our economy equivalent to what they receive in compensation? And if it is, why are they so eager to hide it, as revealed in this article from last Sunday’s New York Times? Why not vaunt it as befits leading members of our supposed “meritocracy?”
Is it not, rather, indicative of that mentality that makes them wish to wall themselves off as a separate class from the rest of us in sequestered enclaves of privilege?
By MATTHEW GOLDSTEIN, Sunday, May 28, 2017 for The New York Times
The Pay Gap Widens
. . . No matter how you look at it, the pay gap between corporate executives and most everyone else in America keeps getting bigger.
Some 50 years ago, the typical chief executive made just 20 times what an employee did, according to the A.F.L.-C.I.O. By comparison, it calculated that the average C.E.O. today made 347 times the average salary of an American laborer, as defined by the Bureau of Labor Statistics: $37,632.
Reversing this ever-widening pay gap is a union rallying cry, especially at companies that have been shedding jobs in the United States. . . .
Amid populist anger over income inequality, the S.E.C. in 2015 required publicly traded corporations to begin providing standard information in 2018 on the disparities between pay for chief executives and rank-and-file workers. That so-called pay-ratio rule would give investors and employees another metric for evaluating C.E.O. pay.
Unions strongly supported the measure, which the S.E.C. was directed to formulate under the 2010 Dodd-Frank financial overhaul rules. Most corporations bitterly opposed it. And in February, with Mr. Trump in the White House, corporations won a victory; the S.E.C. said it would seek a new round of public comments, and might reconsider the measure. The acting chairman, Michael S. Piwowar, who had voted against the pay rule in 2015, announced the change.
Jay Clayton, the newly sworn-in chairman, has not taken a position on the pay-ratio rule. When asked during his confirmation hearing whether he agreed with Mr. Piwowar’s decision, Mr. Clayton said, “I do not know enough about the issue.” But Republicans in Congress have generally voiced support for rolling back much of Dodd-Frank, and Mr. Trump has said he intends to “do a big number” on the law.
Business Roundtable, an association of chief executives of leading United States companies, sent a letter to the S.E.C. on March 23 saying it “has significant concerns” with the pay-ratio rule and recommended that it be “reformulated in a more constructive and less burdensome manner.” The association went on to say the rule “will cause internal discord among employees” [as it very well should] and “serves no material, valid or helpful purpose for investors.”
The chairman of Business Roundtable is Jamie Dimon, the C.E.O. of JPMorgan Chase and the 25th-best-compensated chief executive in the Equilar survey. His pay package rose 49 percent last year, to $27.2 million. Mr. Dimon, a member of Mr. Trump’s C.E.O. advisory group, visited the White House on Feb. 3 and has praised the president for awakening “animal spirits” in the economy. [Mr Dimon is identified in an adjoining article in the Sunday Times as “the highest paid finance executive” whose “total compensation was $27.2 million, nearly a 50 percent increase from the $18.2 million he received in 2015. . .” No wonder he didn’t want it advertised.]
Alan Johnson, managing director of the pay consulting firm Johnson Associates, said he supports the opposition to the pay-ratio rule because it “is a cooked-up thing to embarrass firms with a lot of part-time workers.” He added that focusing on compensation leads to “pay envy” and does not do anything to address a fundamental problem, which is that average workers need better job training and job assistance programs. [Of course they do. Why don’t he and others of the managerial class do something about this instead of inventing a new syndrome, “pay envy”? As far as part-time workers are concerned, the firms that hire them deserve to be embarrassed since the recent proliferation of part-time employees serves as an excuse for not providing them with medical and other benefits.]
But Susan R. Holmberg, a fellow with the Roosevelt Institute, a liberal public policy group, said that if the pay-ratio rule encourages employees to join unions, it is a good thing for workers, since it could lead to future wage gains.
“It magnifies the unequal pay practices,” Holmberg said. “It shows what a company’s priority is, and it triggers people’s sense of fairness.”
Mr. Trump “ran on this populist message,” she said, and it is odd that the administration would be taking another look at the pay-ratio rule, because “C.E.O. pay is the No. 1 populist issue.”
Investing in Human Capital
Still, there is some progress on the pay inequality front.
This year, the A.F.L.-C.I.O. Equity Index Fund and the New York State Common Retirement Fund reached an agreement with Regeneron Pharmaceuticals, a biotech company, to include new language on executive and employee compensation in its proxy statement. It says the company is taking a “non-elitist” approach by awarding stock options to all of its 5,500 employees, not just to executives. The change has helped lead the union and the New York pension system to withdraw a proposed shareholder amendment on the issue of pay.
Alexandra Bowie, a Regeneron spokeswoman, said the revised language in the company’s filings did not reflect a change in policy but a “broader effort to include more detailed and accessible language.”
As for Leonard S. Schleifer, the chief executive of Regeneron, his total compensation for 2016 was $28.2 million, almost 40 percent less than the year before, and nearly matching the 32 percent slide in the company’s share price.
Anne Sheehan, director of corporate governance at the California State Teachers’ Retirement System, said company boards need to be sensitive to issues of income inequality. “I have no problem with someone doing well, who creates value,” she said, “but I do think a company and a board as they look at compensation need to make sure everyone down the chain is also benefiting from the performance of the company.”
Boards need to consider not only how much top executives are getting paid, she said, but also whether rank-and-file workers are being compensated fairly too. The crucial question is this, Ms. Sheehan said: “Are they investing enough in the human capital in the company?”
Biltmore, Asheville N.C., once the home of George Vanderbilt, is the largest privately-owned house in America. Mr Vanderbilt bankrupted himself in the course of its construction.