At AFL-CIO Rally, Trumka Says Pay Ratio Calculation Is a Two-Day Exercise

December 23, 2011

This week, at an AFL-CIO conference to rally support for the Dodd-Frank pay ratio requirement and to urge the SEC to publish rules implementing a strict interpretation of the provision, there was plenty of rhetoric but little acknowledgement of the immense difficulties employers would face in complying with the mandate.

  • Kicking off the event, Richard Trumka, President of AFL-CIO glossed over the difficulty of calculating the pay ratio, stating if "you give me a computer and a list of your employees and subsidiaries, I’ll figure the pay ratio out in two days."

  • Rep. Elijah Cummings (D-MD), Ranking Member of the House Oversight and Government Reform Committee, served as the keynote speaker and played to the theme of pay inequality, as did Sarah Anderson, Global Economy Project Director for the Institute of Policy Studies, who reiterated her arguments that extreme gaps in pay undermine company morale and enforce rigid hierarchies.  She insisted that the ratio cover all employees, because international information is "very important in this global economy" so investors can understand who is outsourcing jobs. 

  • Robert Brown, a professor at the University of Denver Law School and “Race to the Bottom,” blog author argued that the statute is challenging but is "not so broken that it can't be implemented."  However in arguing that the provision leaves considerable regulatory flexibility for the SEC, he appears to suggest that the SEC amend provisions of the regulations that Dodd-Frank locks into place. 

Other parts of the conference addressed say on pay, with Anne Sheehan, Corporate Governance Director, California State Teachers Retirement System, noting that companies are being responsive when CalSTRS has asked for more insight into company pay plans following a mediocre say on pay vote.  Reinforcing the notion that most institutional investors do not view the pay ratio as helpful, Ms. Sheehan explained that CALSTRS reviews the differences in pay between CEO and other named executive officers, but remained silent during the Dodd-Frank pay ratio discussion.  The Center On Executive Compensation has filed extensive comments with the SEC explaining the complexity of implementing the pay ratio through statistical sampling and has urged the Commission to carefully consider other alternatives before proposing a rule.