VEA Vice Chair Nell Minow is quoted in Forbes on the pay ratio:
Corporations and their proxies so far haven’t embraced the mandatory pay ratio disclosures. Instead, they’ve attacked the measure and tried to undercut what insight the information can provide. Nell Minow, an old colleague of mine, expert in corporate governance, and vice chair of ValueEdge Advisors, called the rhetoric “corp-splaining” — companies trying to tell people outside of a corner office why they shouldn’t care — and pointed to a blog post from Pearl Meyer. The company, which advises on compensation (which often means justification for eyebrow-raising levels of pay for executives), dismissed the pay ratio, saying “this isn’t anything we didn’t already know.”
Instead, the firm focused on the terribly high costs it says companies are forced to pay to pull the information from multiple computer systems that don’t talk to one another.Ah, yes, all that time and effort. (From a strict business view, if your systems don’t talk to one another, don’t complain about the expense of compiling data for a regulator, or possibly an executive or board director. Fix the systems.)
We do know that CEOs make a lot of money at publicly-held companies. Pay disclosure has been mandatory for many years. There are also multiple studies to show that corporate financial performance doesn’t correlate to CEO pay. Pushing more money at the CEO, as we’ve learned time and again, doesn’t mean the company will do better.
But the comparison within a company of CEO pay to that of the employee in the middle of the pack is informative. The metric gives you an idea of what it takes to support that top salary, which may not be doing anything for the company, the investors, workers, communities, or other potential stakeholders.