Citing new data on pay disparity, Senator Robert Menendez (D-NJ) urged the SEC to quickly finalize the pay ration regulations mandated by Section 953(b) of the Dodd-Frank Act. Under Section 953(b) the SEC must adopt rules requiring new disclosures about the ratio between the median of the annual total compensation of an issuer's employees and the annual total compensation of the issuer's chief executive officer. The SEC proposed the pay ratio rules in September of 2013 in changes to Regulation S-K, Item 402.
In a letter to the SEC, Senator Menendez, the author of Section 953(b), said that the new report analyzed recent filings from publicly-traded corporations and found large disparities between CEO and average worker pay. In particular, it concluded that the fast food industry is particularly egregious in this regard, with a CEO-to-average worker pay ratio of over 1 ,000-to-1 in 2013. In addition to the human costs, the report notes evidence to suggest that high levels of pay disparity undermine firm performance due to labor unrest, lower levels of customer satisfaction, and exposure to other costs associated with extreme disparity. The report concludes that corporate shareholders need better information on pay disparity in order to assess the relative risk of competing investment options.
Urging the SEC to move forward without delay to finalize the pay ratio regulations, Senator Menendez said the findings in the report provide new impetus for the regulations. Currently, investors have access to data on CEO pay, he observed, but until the pay ratio rules are finalized, investors will have only imprecise data to assess the other half of the pay disparity equation, the typical pay of workers in the firms they own. This is information that investors need and have a right to know, he emphasized.