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Congressional Progressives to SEC: Publicize Pay Gap Between Workers and CEOs (Updated)

The Securities and Exchange Commission (SEC) could soon mandate that corporations make public the ever-growing pay gaps between executives and workers after a series of delays that have for years frustrated congressional progressives.

The Securities and Exchange Commission (SEC) could soon mandate that corporations make public the ever-growing pay gaps between executives and workers after a series of delays that have for years frustrated congressional progressives. Shutterstock

Update, August 5, 2:44 p.m.: The SEC on Wednesday approved the pay ratio rule, which will take effect in 2017. The rule passed in a 3-2 vote, with both Republican commissioners opposing the rule.

The Securities and Exchange Commission (SEC) could soon mandate that corporations make public the ever-growing pay gaps between executives and workers after a series of delays that have for years frustrated congressional progressives.

CEOs earn 997 percent more today than they did in 1978, while employees have seen their compensation grow by less than 11 percent over that span. The average CEO of an S&P 500 company made $373 for every $1 a worker made in 2014, according to data collected by the AFL-CIO. More than 95 percent of Fortune 500 executives are white men, the report continues.

SEC officials are expected to finalize a rule Wednesday requiring publicly traded corporations to disclose the ratio of the compensation for their CEO to that of their median worker. The “median worker pay ratio rule,” also known as the disclosure rule, is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed through the then-Democratic-controlled Congress in 2010.

The SEC has put implementation of the rule on hold three times since 2011 as business lobbying groups, including the U.S. Chamber of Commerce, claim it will prove costly for companies and provide little or no economic value. Executives from many U.S. corporations have complained that the government’s disclosure rule isn’t clear and that calculating median worker pay can be a cumbersome process, the Wall Street Journal reports. They are urging the SEC to delay the implementation until next year.

Members of the Congressional Progressive Caucus wrote in a letter last week to SEC Chair Mary Jo White that they were frustrated by the agency’s stalling. The legislators, including Rep. Keith Ellison (D-MN) and Rep. Chris Van Hollen (D-MD), opposed waiting until 2016 to announce the finalized rule, which is projected to impact more than 3,800 U.S. companies.

Congressional progressives urged White to make the pay ratio rule comprehensive. Economists familiar with the SEC expect the agency not to demand that companies calculate an exact median worker wage, but rather a “statistical sampling of the pay of its employees to divine the median,” the New York Times reports.

“The SEC rule must require companies to include all domestic, international, full-time and part-time workers in the calculation of the CEO-to-worker pay ratio,” the progressive caucus wrote in its letter to White. “A rule that excludes international and part-time workers would be a clear violation of congressional intent.”

It’s not just CEO salaries at the top-earning U.S. companies that have seen a sharp rise, but executive pay across the board, according to a report from the Economic Policy Institute that examined pay inequality over the past three decades.

Some U.S. companies have disclosed CEO and median worker pay data before the official implementation of the SEC’s rule, the Wall Street Journal reports. For example, Northwestern Corp., an energy company, made public its compensation ratios and showed that the corporation’s CEO makes 24 times more than its median worker.

The caucus’ letter is not the first time House and Senate progressives have leveled sharp criticisms against White during her time as SEC chair. Sen. Elizabeth Warren (D-MA) wrote in a June letter to White that she was “extremely disappointed” in her leadership of the agency, and that a laundry list of “broken promises” to lawmakers included the continued delay of the pay disclosure act in the Dodd-Frank bill.

Warren charged that White provided the senator with “misinformation” during a May meeting about the finalizing of the CEO pay disclosure rule. White, according to Warren’s letter, said she would not change the way she ran the SEC despite persistent congressional concerns and criticisms.

White, before being nominated to head the SEC, worked at a law firm that represented Wall Street companies. White’s husband has continued to work for a law firm with Wall Street clients, prompting White to recuse herself from many SEC decision-making processes. White told members of Congress during her nomination that such recusals were not “out of the ordinary” for SEC heads.