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.