FIGHTS over splitting the loot have gone on for as long as there has been loot to split. In America, those brawls are now part of the remit of the Securities and Exchange Commission (SEC). After heated arguments and a vote that passed by three ballots to two, on August 5th the SEC approved rules (themselves tied to provisions in the Dodd-Frank act of 2010 that overhauled financial regulation) which will require public companies to publish the ratio of their chief executive’s pay to that of their median earner, starting in 2017.
“To say that the views on the pay-ratio disclosure requirement are divisive is an obvious understatement,” acknowledged Mary Jo White, who chairs the SEC. A mind-boggling 287,400 letters commenting on the proposals were sent. In a reflection of how the issue had become the subject of an organised political campaign, only 1,500 of these were unique.
Shareholders have an interest in compensation, in as much as it is a significant cost under management control. Pay therefore raises issues of “agency” that arise from the delegation of power by shareholders to bosses. That, at least, is the pretext for squeezing the issue into the SEC’s jurisdiction under its authority to protect investors. The reality is that the proposal was included in Dodd-Frank after lobbying by trade unions aiming to shame bosses into paying themselves less and...
from The Economist: Business http://ift.tt/1IKknEp
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