On Wednesday, the US Securities and Exchange Commission is expected to finish drafting a legislative measure that would force U.S. businesses to unveil how much more their CEOs make than their other employees.
The measure was affected by several delays since U.S. corporations would not hand down that information to the public so easily, and the figures may affect their public image. But the new rule will allow American workers to finally see how much more their bosses earn, a sensitive piece of information big businesses have long fought to keep secret.
And the numbers may spark hot debates because according to a recent report U.S. workers’ pay recorded the slowest growth since 1982. About a half of century ago, top executives earned $20 per every $1 their subordinates made. But today, that figure soared to $300 per every $1, and the gap is becoming even larger.
So, more transparency may prompt corporate America to keep under control executive pay because investors could have a clear view on how costly top positions in the firm they had invested in were, while customers may boycott some companies by choosing to buy products and services from their competition.
The pay ratio can also help future employees make the best decisions when choosing to work for a company. Towers Watson, a HR consulting firm, noted that the information is sensitive because workers will be able to compare themselves in pay with their bosses and their peers that work at competitors.
On the other hand, U.S. businesses report their CEO’s salary and benefits on a regular basis. But they are not compelled to unveil the ratio pay which may make many Americans to have a distorted view on corporate pay and the financial gap between top and bottom positions.
According to a paper published in the Perspectives on Psychological Science last year, Americans believe that the pay ration is 30 to one, when in fact it is over 300 to one. Researchers noted that that misinformation makes people and unions alike less likely to fight income inequality.
On the other hand, opponents of the new rule claim that calculation of pay ratio may often result in errors and be a quite costly endeavor. One of the critics said that “burdening” companies and shareholders with such requirement was a “very poor tool” for addressing income inequality.
The rule was first proposed in 2010 as a last-minute provision to a financial reform that sparked nationwide outrage over the lofty executive pay and bonuses at companies that were saved from bankruptcy through taxpayer money.
Image Source: Career Tipster
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