Newspaper article International Herald Tribune

U.S. Puts Focus on Executive Pay ; Rule Would Force Firms to Compare Compensation of Managers and Workers

Newspaper article International Herald Tribune

U.S. Puts Focus on Executive Pay ; Rule Would Force Firms to Compare Compensation of Managers and Workers

Article excerpt

The Securities and Exchange Commission is nearing adoption of a rule that would require chief executives to compare their pay with the median paid to employees.

The gap in pay between chief executives and rank-and-file employees has been growing steadily, and now U.S. regulators want companies to tell investors just how wide it is.

The Securities and Exchange Commission proposed a rule on Wednesday that would require publicly traded companies to report the ratio of top executive compensation to the median compensation of their employees. Three of the five members of the S.E.C. voted in favor of the proposal.

Public scrutiny over outsize pay packages at some of the biggest companies has intensified since the financial crisis, and the S.E.C. said it had received more than 20,000 public letters in support of and opposition to its new proposals.

The response from the S.E.C.'s five commissioners reflects the divisive nature of the topic of executive pay. One commissioner, Daniel M. Gallagher, called the proposal a "rotten mandate" while another, Luis A. Aguilar, praised it as a significant step toward "enhanced accountability."

The proposal is part of the Dodd-Frank financial overhaul legislation, which requires the S.E.C. to amend existing rules on pay disclosure. Publicly listed companies are now required to disclose the compensation of their chief executives but not the pay of other employees.

The S.E.C. has proposed that companies disclose two additional data points in their filings. One is the median of the total compensation for all employees excluding the chief executive, and the other is the ratio between that number and the chief's annual total compensation.

The median pay package for the top 200 executives in the United States was $15.1 million last year, according to Equilar, an executive compensation analysis firm. That was an increase of 16 percent from 2011.

Proponents of the new rules praise them as progress toward more transparency and increased information for investors, with the added benefit of putting pressure on boards to curb increases in executive pay.

"There are huge problems with pay disparity both within our portfolio and in society," said Michael Garland, who leads the corporate governance unit in the New York City comptroller's office, which oversees $139 billion in pension fund money and votes on corporate compensation packages for more than 3,500 companies. …

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