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  • More and Better Disclosures!

    Posted by David Foster on March 29th, 2018 (All posts by )

    It’s now required for publicly-traded companies to publish the ratio between the CEO’s annual compensation and that of the median employee.  That ratio is, for example,  367:1 at Disney (Robert Iger), 124:1 at Deere & Co (Samuel Allen), and 50:1 for Whirlpool (Jeff Fettig). Link

    These numbers (which, it should be clarified, include seasonal and part-time employees) have caused much alarm in many quarters, and even referred to as heralding a “crisis of capitalism.”

    But why stop at CEOs and other business executives when requiring this kind of analysis?  My idea is that there are many other fields in which high-visibility disclosures could be interestingly required…

    In movies, for example, it should be required that the opening credits include the ratio of the pay of each of the top 5 stars to the median pay of the entire crew that worked on the film–including accounting clerks, boom operators, sweepers, and various ‘assistants to’.

    In professional sports, team uniforms should display prominently the total value of the player’s current contract.  This feature would greatly add to the pleasure of fans, who could instantly and continuously compare the player’s financial value to his demonstrated, moment-by-moment playing-field value.

    At colleges and universities, a sign out front of the president’s mansion should display the ratio of his compensation to that of the median faculty member, which category of course must include the starvation-paid adjunct professors.  (The compensation number for the president should certainly include the imputed value of his university-provided mansion and any other similar benefits, such as cars and drivers.)

    For politicians, the disclosure problem is a little more complicated, since in many cases the main financial payoff for these jobs is in the form of “deferred compensation”, i.e., lobbying positions and consulting contracts offered after the term of office ends, in recognition of services rendered while in office.  About all I can think of for the politician class is that, for all public appearances, they must wear jackets, with the names of their top sponsoring/contributing organizations prominently emblazoned, in a manner similar to the way racecar drivers display the names of their sponsors.

    There are probably a lot of additional possibilities for disclosure and transparency, which the ChicagoBoyz and Chicago Grrrlz and Readerz can surely suggest.

    Concerning those who support the CEO pay-ratio requirement but would object to these further suggestions…I have to wonder if their primary agenda really concerns ‘inequality’ or is really about something else.

     

    10 Responses to “More and Better Disclosures!”

    1. Assistant Village Idiot Says:

      Or we could judge people based on the content of their character instead.

    2. Overload in CO Says:

      It wouldn’t work for movies, as stars are no longer directly paid. Instead they have shell companies to hide the income from tax payers.

      Isn’t there also something where CEO get low salaries, but high benefits like stock options, use of a car, etc?

    3. tyouth Says:

      “required” ? I’m guessing that’s hyperbolic David?

    4. David Foster Says:

      Overload…”Isn’t there also something where CEO get low salaries, but high benefits like stock options, use of a car, etc?”

      The standard required disclosure in (annual) 10-K submissions does include estimated value of stock grants, options, and various other compensations:

      existing executive compensation rules, namely Item 402(c)(2)(x)

      It appears that the Dodd-Frank requirement for median-ratio publication references this same methodology:

      https://www.sec.gov/news/pressrelease/2015-160.html

    5. David Foster Says:

      The PayScalelink at the beginning of this post says that they looked only at cash compensation, but the actual SEC filing for Disney cites Salary for Robert Iger at $2.5 million….the rest of the $36.2 million cited represents stock awards, option awards, etc.

      https://www.sec.gov/Archives/edgar/data/1001039/000104746918000180/a2233502zdef14a.htm#execcomp

      (page 36)

      So, now that I look at it in some detail, I’m not sure where exactly the $26MM cash compensation cited in the PayScale report actually came from.

    6. CapitalistRoader Says:

      For politicians, their net worth along with the percentage increase in net worth from the day before the took office to the present.

    7. David Foster Says:

      Correction: The 2017 salary for Iger at Disney was indeed $2.5MM, but it appears that the ‘non-equity incentive compensation’ of $15.2MM was probably also cash.

      However, the formal, legally-required disclosures do require that equity grants, etc, be included. Here’s the one for Norfolk Southern Railroad:

      https://seekingalpha.com/filing/3945499#NORFOLK3300981-DEF14A_HTM_SUMMARYCOMPENSATIONTABLE49

      See page 49.

    8. Anonymous Says:

      For universities the comparison should include all employees, not just faculty. That would include grad assistants and football coaches as well. The comparison should include the chancellors of the university systems as well.

      What fun! Much of this info is public domain (in the case of state colleges) so no law is required. It only requires collection and presentation.

      Death6

    9. David Foster Says:

      Death6….alternatively, comparison could be with family income of students attending the university.

      Professional sports, compare ’em to average income of the fans.

    10. PenGun Says:

      As long as the numbers are available, I prefer to do my own math.