Labor activists are hoping that a newly implemented provision of the Dodd-Frank Act will lead to a national reckoning over the wage gap between corporate executives and rank-and-file workers.
Although Dodd-Frank was passed in 2010, this is the first year that companies will have to comply by a provision of the law that requires publicly traded corporations to disclose how much more their CEO makes than the median employee.
In addition to potentially embarrassing companies that report gargantuan wage gaps, advocates for disclosure say that pay transparency will embolden employees to demand higher wages. It's about time, they argue, considering how wages have lagged behind economic growth in recent years.
“Most companies would say their employees are their biggest assets—so why are investors left in the dark about such basic factors, like what they pay employees?” Brandon Rees, deputy director of the AFL-CIO's investment office, tells the Wall Street Journal.
Related: CEOs make more than employees… a lot more
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If nothing else, the disclosures have provided some interesting comparisons between companies.
So far, the largest reported pay ratio between CEO and median employee comes from Marathon Petroleum Company. The $19.7 million CEO Gary Heminger made last year amounts to 935 times more than the median employee's salary: $21,034.
Marathon was quick to note in a subsequent filing that about three-quarters of its 44,000 employees work in gas stations. Many of them are part-time workers. The median pay for employees who don't work in its convenience stores is $126,000. They make only 156 times less than Heminger.
By comparison, Kraft Foods came off as relatively egalitarian. Its CEO made $4.1 million last year, or 91 times what its median employee made: $46,000.
Meanwhile, the CEO of Kellogg, a food company that is significantly smaller, made far more: $7.6 million. Its median employee also made less: $40,000.
Experts stress caution in interpreting the numbers. There are likely multiple ways to calculate the earnings of the “median” employee. Some companies are reporting based just on salary, while others are taking into account stock options and other types of compensation that employees receive.
As is often the case, companies will justify multi-million dollar compensation for executives by pointing to the company's strong performance under their leadership. Indeed, Honeywell described the $16.75 million its CEO earned last year as a response to a particularly profitable year, including a 35 percent increase in the value of the company's stock.
Hamilton Nolan, a writer for the liberal news website Splinter News, said that reasoning has to apply to employees outside of the C-Suite.
“The company owes its great performance to you, the workers, right?” writes Nolan. “That's what they say in all their internal emails. But how much profit sharing are you getting? What percentage of stock price growth is accruing to you, the average workers, as bonuses or pay increases?”
From: BenefitsPro
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