As U.S. companies disclose their pay ratios this year, investors and employees will gain a new tool in the fight against inequality according to Sarah Anderson, global economy director at the Institute for Policy Studies, a Washington think tank, and co-editor of Inequality.org.
Last week, Honeywell became the first big U.S. company to report the ratio, required by the 2010 Dodd-Frank Act. The company said its CEO’s $16.8 million pay package for last year is about 333 times more than what its median employee earned. The ratio varies widely. Apollo Global Management, for example, reported a 1-to-1 ratio, with CEO Leon Black’s $251,888 compensation almost matching the $249,750 for the firm’s median employee.
Anderson spoke to Alicia Ritcey on Feb. 22. Comments have been edited and condensed.
Do you think companies are right that this is just a naming and shaming exercise?
I guess I’m one of the people that doesn’t see a problem with naming and shaming. We have levels of inequality in this country now that are shameful and there’s just no reason why CEOs are making so much more than they were 30 or 40 years ago. They’re not any more efficient, there’s just no evidence to show that their performance has risen in tandem with their pay levels.
When we first saw the pay ratio amendment in the Dodd-Frank legislation, we thought this is just a disclosure rule — it’s a step forward but probably won’t have a huge impact in terms of affecting pay levels. But then we saw the reaction of the corporate lobby groups who fought this relentlessly. That opened our eyes to the idea that this was even more important. People see excessive CEO pay as a key factor in rising inequality in this country.