U.K. to Require Firms Justify Pay Gap Between Bosses and Staff – Should We?

What’s the story?

• U.K. companies with over 250 staff will have to publish – and justify – the salaries of their CEOs, and reveal the “pay ratio” between the CEOs and average workers.
• As Sky News explained, “The move comes after years of shareholder and public outrage over bumper chief executive pay at firms such as Persimmon, WPP, BP, Shell, Lloyds…” and a number of other U.K.-based companies.

CEO-worker pay ratios in U.S.

• The Dodd-Frank financial reform act mandated that companies disclose the ratio of CEO vs. average worker pay.
• The first of these was published in February, which found that in 2017, technology company Honeywell’s CEO Darius Adamczyk was paid 333 times as much as a median Honeywell employee.
• Walmart: CEO C. Douglas McMillon was paid $22.4 million in 2017 vs. an average worker’s $27,800. That’s an 805-to-1 ratio.

Tax cuts & stock buybacks

• The Tax Cuts and Jobs Act lowered the corporate tax rate from 35 percent to 21 percent. This led to a number of bonuses, but also layoffs.
• The Securities and Exchange Commission has also seen an increase in stock buybacks.
• On Monday, Robert Jackson - who was appointed by Trump to one of the SEC's Democratic seats - called for his colleagues to update and reexamine rules relating to stock buybacks.
• "We give stock to corporate managers to convince them to create the kind of long-term value that benefits American companies and the workers and communities they serve,” Jackson said in a speech at the left-leaning Center for American Progress.

"Instead, what we are seeing is that executives are using buybacks as a chance to cash out their compensation at investor expense."

What do you think?

The U.K. is going one step beyond the Dodd-Frank mandate, requiring companies to explain the pay-ratios in their businesses. Is it time for the U.S. to enact similar laws? Hit Take Action and tell your reps, then share your thoughts below.

—Josh Herman

(Photo Credit: tsvibrav / iStock)