Outrages from the Rich, While India Leads the Way on Disclosing Executive Pay
Never let it be said the ultra-rich do not have ultra-gall. When they’ve got it, and regardless of the ulterior methods they used to amass wealth by ripping off the rest of us, they flaunt it.
Meanwhile, even in advance of action earlier this month by the U.S. Securities and Exchange Commission, India led the way in forcing disclosure of executive pay.
Consider some of the rich’s latest outrages, courtesy, among other sources, a website called “The Rich Kids of Instagram.” Its motto is “They have more money than you and this is what they do.”:
Dunkin’ Brands CEO Nigel Travis is calling the decision to raise the hourly minimum wage for New York fast food workers from the current $8.75 to $15 statewide in 2021“absolutely outrageous.” This “sudden increase,” Travis declared last month in a CNN interview, will hurt the small-business people who run Dunkin’ franchises.
Travis enjoyed a bit of a “sudden” pay hike himself. He made $10.2 million last year, over double his take-home the year before. That sudden move upped his personal pay rate, assuming he works 50 hours a week, to $4,000 an hour. Travis says the minimum wage hike will mean “less hiring” at Dunkin’ Donuts. Adds the CEO: “I don’t want to sound threatening.”
• The world’s wealthiest are hiding from their national tax collectors as much as $32 trillion, calculates former McKinsey chief economist James Henry, “a sum larger than the entire American economy.”
• Connecticut’s Bridgeport-Stamford-Norwalk metro area, America’s top haven for hedge funds, also ranks as the nation’s most unequal urban area, says a new 24/7 Wall St. analysis. The area’s poorest 20 percent take home just 2.3 percent of local income. The top 20 percent: 59 percent.
• Three of the five zip codes with the highest income in the United States sit in New York City, the area which houses the offices of many of those Bridgeporters and Stamfordites. Taxes in each of these three zip codes average over $2.1 million per federal tax return filed.
• An over-the-top hobbyist: A hefty chunk of the campaign cash for GOP presidential candidate Ted Cruz, The New Yorker reports, comes from Robert Mercer, a hedge fund exec who once sued “a toy company that installed a model train set in his home and, he felt, overcharged him — by two million dollars”!
All of this makes India’s action much more noticeable.
In India, firms now must disclose the ratio between CEO and median worker pay. India acted because the U.S. did not, until this month. The results were revealing.
Indian lawmakers passed a CEO-worker pay ratio disclosure mandate in 2013, three years after the passage of the Dodd-Frank Act, which mandated such disclosures in the U.S. But India acted quickly to put its mandate into effect, and the first required pay disclosures are now emerging.
The top exec at India’s largest cigarette maker, the Indian public has learned, is making 439 times the median employee salary at his company. His counterpart at India’s top IT services firm is pulling down 416 times his company’s most typical employee pay.
Disclosures like these, one Indian business publication editorial noted last month, “drive home the point that income inequality is alive and well in corporate India” — and needs “reining in.”
Meanwhile, Wall Street spent $1.166 billion in the last five years to elect lawmakers opposed to Dodd-Frank’s financial industry reform, and another $2.08 billion on lobbying to keep those reforms from going into actual effect.
No wonder some 84 percent of likely U.S. voters in 2016 describe themselves as “concerned” about the influence of Wall Street executives on public officials, including 64 percent who call themselves “very concerned,” finds new Lake Research polling.
The corporate stall of Dodd-Frank worked, but the U.S. Securities and Exchange Commission finally adopted modified reforms in early August.
The SEC’s reforms order corporations to annually reveal the ratio between their CEO and median worker pay. Pay ratio disclosure makes the “reining in” that the Indian publication advocated easier. Disclosure gives shareholders a benchmark they can use to compare the pay gap at their company with the gaps at other firms in their industry.
Many consumers don’t want to do business with firms that overcompensate CEOs.
With this info in hand, observers believe, institutional shareholders in India “have no excuse for remaining silent spectators when corporate boards approach them with exorbitant pay packages.”
U.S. activists won’t have to rely only on shareholders to rein in executive excess. They could link ratios to legislative remedies, by pressing for corporate tax rate hikes on companies with wide pay gaps or pushing to deny government contracts to firms with wide divides.
Activists could also organize consumer campaigns against corporations that overpay their execs at the expense of their workers.
Such campaigns, new research shows, would likely encounter widespread support. If given a choice, Harvard Business analysts Bhavya Mohan, Michael Norton, and Rohit Deshpandé have found, consumers would rather buy from companies with fairer CEO-worker pay ratios.
Ratio disclosure, in other words, could be a game-changer, and activist groups in the United States, Institute for Policy Studies analyst Sarah Anderson says.
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Image from iStock.
