Income Inequality & SEC Disclosure

The NYTimes "Room for Debate" series put up an unusual set of posts yesterday, on the topic of the growing concentration of American wealth in fewer and fewer hands.

800px-United_States_Income_Distribution_1947-2007.svgUnusual, because the half-dozen or so correspondents in the forum seem to agree that the trend toward inequality is not a big deal.

This made me think of the news last week about a bill in Congress, sponsored by Rep. Nan Hayworth of New York.

Rep. Hayworth's bill seeks repeal of a provision in Dodd-Frank that would (after requisite SEC rulemaking, not yet started) require companies to disclose the ratio of "the median of the annual total compensation of all employees of the issuer, except the chief executive officer," to "the annual total compensation of the chief executive officer (or any equivalent position) of the issuer." In other words, Dodd-Frank wants to raise consciousness about income inequality, company by company.

I still think it borders on the surreal that the main argument for Rep. Hayworth's bill seems to be that we can't reasonably expect public companies to know what they pay their employees (God forbid anyone look at the W-2s that get filed!). But I won't go there.

I won't go there because, when checking the precise reference in Rep. Hayworth's bill to Dodd-Frank, I found, to my surprise, that her bill does not attempt to repeal the following provision of Dodd-Frank:

"The Commission shall, by rule, require each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer a clear description of any compensation required to be disclosed . . . including information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions."

That is to say, Rep. Hayworth seems to think its okay to try to relate pay to performance, to stick those ratios in the eye of Wall Street, even if it is unsporting, or uncouth, or un-whatever, to foment class resentment which, if the NYTimes is right, isn't in the spirit of today anyway.

Graph by Alan De Smet.


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