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Say on Executive Pay Passes the Securities and Exchange Commission By a 3-2 vote

Source: Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

Socialfunds.com reported today that in accordance with the Dodd-Frank financial reform bill, the Securities and Exchange Commission (SEC) issued rules on shareowner approval of executive compensation and golden parachute arrangements.  The press release states that the rules adopted by the SEC require public companies that are subject to the federal proxy rules to provide shareowners with an advisory vote on executive compensation at least every three years. Companies must also provide shareowners with a vote on the desired frequency of executive compensation votes every six years.

This decision could not come any sooner as the CEO-worker pay gap remained astonishingly large in 2010.  Recent research by Professor G. William Domhoff from the Sociology Department of the University of California, Santa Cruz (September 2005 updated January 2011) shows that that the median compensation for CEO’s in all industries as of early 2010 is $3.9 million; it’s $10.6 million for the companies listed in Standard and Poor’s 500, and $19.8 million for the companies listed in the Dow-Jones Industrial Average. Since the median worker’s pay is about $36,000, then a quick calculation shows that CEOs in general make 100 times as much as the workers, that CEO’s of S&P 500 firms make almost 300 times as much, and that CEOs at the Dow-Jones companies make 550 times as much (statistics source:  AFL-CIO).

Let’s hope this SEC ruling, or the power it gives to shareholders, makes a difference in the CEO-wroker pay gap going forward; and that investors really do have a say on pay.

Written by Emily DeMasi

Emily McKinin DeMasi is a 2011 MBA/ MA Public Policy candidate and Peace Corps Fellow at Duquesne University in Pittsburgh, PA. Her thesis work concerns Corporate Social Responsibility in the United States. She also works as a Research Fellow at Bridgeway Capital, a Community Development Financial Institution (CDFI) in downtown Pittsburgh. Emily has worked as an Associate in a Private Equity Placement Firm in NY and as a Water and Sanitation Volunteer in Ivory Coast, West Africa. She hopes to combine her business background with her passion for development and inspire others in the fields of Sustainability and CSR.

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