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.