Companies with high CEO-to-worker pay ratios may suffer from a winner-take-all philosophy where the CEOs reap the lion’s share of compensation. Employee productivity, teamwork and collaboration suffer when workers see that their CEO’s pay is going up at the same time that they are asked to do more with less.

Pay ratio disclosure will allow investors to cast more thoughtful votes on executive pay. Investors can now see how their companies’ pay ratios and median employee pay compares to their industry peers. As these pay ratios change over time, investors can monitor these changes to help guide their investment decisions.

Pay Ratios of S&P 500 Companies by Industry

Pay Ratios by Industry Chart

Big corporations have rigged the rules of our economy by passing a trillion-dollar corporate tax cut that rewards companies for offshoring jobs. The new tax law slashes the corporate tax rate from 35% to just 21%. It also reduces corporate taxes on overseas earnings and creates incentives to move real assets offshore.

CEOs are responding to the corporate tax cut windfall by buying back shares of stock rather than investing in their own company’s future growth and the creation of good jobs. According to a Wall Street Journal analysis, S&P 500 company stock buybacks in the first three months of 2018 more than doubled over the prior year.1

CEO Pay and Stock Buybacks

Growth of Buybacks and Average CEO Pay at S&P 500 Companies

 

Rather than aggressive stock buybacks to boost short-term stock prices and CEO pay, companies should invest in their employees, who are their greatest asset. Pay ratio disclosure will help encourage companies to create high-wage jobs and pay their CEOs reasonable amounts.


1Boom in Share Buybacks Renews Question of Who Wins from Tax Cuts,” The Wall Street Journal, March 1, 2018.