Sam Pizzigati OtherWords
November 1, 2013
In 1930, an obscure lawsuit against Bethlehem Steel unearthed some corporate data that would quickly outrage Great Depression-era America. Bethlehem CEO W. R. Grace, Americans learned, had grabbed $1.6 million in personal compensation the year before.
That revelation would soon help subject America’s top corporations to a variety of new regulations, including a mandate that required companies to annually reveal — for the first time ever — the pay of their top executives.
Over the next four decades, notes historian Harwell Wells, corporations observed an unofficial $1 million limit on annual CEO compensation. No major firms dared exceed that limit — and risk public furor.
But CEO pay started rising again, slowly in the 1970s and then much more rapidly in the 1980s. By the 1990s, million-dollar executive paychecks had become commonplace. By the early 2000s, CEOs were regularly busting the $10 million barrier.
Corporate America has now obliterated still another barrier. In 2012, the firm GMI Ratings just reported, the nation’s 10 highest-paid CEOs all pocketed more than $100 million each.
That had never happened before.
In 2012, GMI found, Sirius XM Radio CEO Mel Karmazin collected $255.4 million in total realized compensation. Of that sum, $244.3 million came from exercising stock options he had received in earlier years.
Karmazin only rates third on GMI’s top-paid 10 for 2012. The year’s first-place finisher, Facebook CEO Mark Zuckerberg, pulled in an astounding $2.3 billion. In second place: the chief exec at energy pipeline giant Kinder Morgan, Richard Kinder, with $1.1 billion.
America’s top-paid CEOs, all these totals show, now reside comfortably in nine- and ten-digit annual pay territory, a level that once upon a time only hedge and private equity fund kingpins called home.
A cause for CEO celebration? You might think so. But today’s top chief execs don’t appear to be celebrating. A deep sense of apprehension, not joy, seems to haunt America’s executive suites. America’s CEOs appear deathly afraid that their gravy train may soon derail.
That fear is driving the massive — and borderline hysterical — lobbying campaign that corporate power suits are now waging against a provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
This particular provision, the law’s section 953(b), requires corporations to annually reveal the ratio between what they pay their CEOs and what they pay their most typical workers.
The U.S. Securities and Exchange Commission earlier this fall proposed regulations to enforce this mandate. Top execs — and their underlings — have been bombarding the SEC with overheated complaints ever since.
By law, the SEC must invite “public comment” before finalizing any new regulations, and corporate execs are commenting away, with protests full of ludicrous doomsday claims.
The National Investor Relations Institute, the trade group that speaks for the corporate officials who handle disclosure issues, is specifically charging that the pay ratio disclosure the SEC seeks to enforce will “confuse most investors” and impose “exorbitant” compliance costs on corporations.
One corporate consultant goes further. He’s claiming that shareholders at corporations that show only modest gaps between their CEO and median worker pay might well demand pay cuts for workers!
The organizations that actually represent workers, America’s trade unions, couldn’t disagree more. They’re lining up solidly for a robust enforcement of the Dodd-Frank pay ratio disclosure. And they’re finding support from business leaders who understand how corrosive wide pay gaps have become.
One small business leader from Colorado, Laurie Norton, reminded the SEC last month that an “inequitable distribution of income” is threatening our democracy.
“Not revealing the absurd ratios of CEO pay to that of average workers,” she told federal regulators, would be the “equivalent to sweeping and leaving our dirt under the rug.”
Let’s clean up.
OtherWords columnist Sam Pizzigati, an Institute for Policy Studies associate fellow, edits the inequality weekly Too Much. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class.