It seems to always be a touchy topic when it comes to how much someone is getting paid. While companies indulge in the freedom to offer whichever pay they think is necessary for a position as the CEO, many people such as investors would like to know where their money is dispersing. Workers also would like to understand why some workers are receiving extremely higher amounts of pay compared to the pay they are receiving.
Under the Dodd-Frank legislation, the pay ratios between a CEO and a median pay for employees became mandatory. GOP has planned to try to destruct this regulation and if that plan doesn’t work they plan for at least a massive scaling back.
Though this regulation is mandatory, corporations and their proxies have yet to embrace the pay ratio disclosures. Instead of discussing these disclosures they’ve attacked the entire measure. These corporations try to undercut what insight the information can provide.
According to Neil Minow, an expert in corporate governance, advisors are trying to convince corporations that they should not worry or care about pay ratios. What is concerning is that the company, who advises on compensation, were those who dismissed the pay ratio issue and then said, “this isn’t anything we didn’t already know.”
Instead of taking pay ratios into consideration, firms focused more on paying multiple computer systems for information at extremely high costs. Instead of simply fixing the system to compile all information data, they paid several different companies to receive the data.
It is commonly known that CEOs of publicly-held companies make crazy amounts of money and that the disclosure of pay is mandatory yet has been severely lacking for many years. Multiple studies have also showed how corporate financial performance does not correlate to CEO pay, increasing the CEO’s pocket more.
Sam Pizzigati made a way of looking at the metric scale that made a significant amount of sense. He showed how the ratio tells how many years it would take for an employee to make the same amount of money as a CEO in the company.
McDonald’s CEO, Stephen Easterbrook, had a compensation of $21,761,052 last year, which has increased from 2016 by $6,405,306. In order for an employee of McDonald’s to obtain a CEO’s yearly pay, they would need to work 3,101 years to match the 2017 compensation of Easterbrook.
In the U.S. a large quantity of fast food workers, specifically 52% of them, are on public assistance due to not having enough money to live on. Thousands of workers rest on the poverty line because of such low pay, while CEO’s are wealthy within the same company.Last year alone, the average S&P 500 CEO made 361 more times than the average U.S. worker, according to an AFL-CIO analysis.
It is very clear that the pay ratio of a CEO compared to an average employee is a very diverse pay scale but, cutting the pay of a CEO would less than likely free up enough money to dramatically raise the incomes for all other employees. Though the principle is in consideration it is channeled to the top and yanked from those who are important.