In recent months, we have seen an increased media focus on CEO pay, due at least in part to the SEC adoption of one of the final rules set forth by the Dodd-Frank act more than five years ago.
The rule will be effective as of the 2017 fiscal year, so it will not show up in public disclosures until the 2018 proxy season.
The purpose of this paper is neither to justify nor discredit the new rule.
The total pay comparison of the typical executive to the average worker in the United States has been a hot button issue for decades.
Approved by the SEC in August 2015, Section 953(b) of Dodd-Frank requires public companies to disclose the ratio of CEO pay to that of the median annual compensation of all employees other than the CEO.
There are sources claiming that for 2014 the ratio was greater than 500:1. Others claim that the ratio is a mere 4:1. The following series of examples will illustrate how researchers might arrive at different answers to just how much relative CEO pay has risen in recent years.
