SEC proposes pay disclosures comparing CEOs to workers

Reuters

* Rule would require disclosure of median worker pay to CEO

* Labor groups favor rule, say it will help investors

* Sharply divided SEC issues release for public comment

* Another rule: SEC to oversee municipal financial advisers

By Sarah N. Lynch

WASHINGTON, Sept 18 (Reuters) - U.S. corporations will needto disclose how the paychecks of their chief executive officerscompare with those of their workers under a new proposalreleased on Wednesday by a sharply divided U.S. Securities andExchange Commission.

With the CEOs of many U.S. companies earning hundreds oftimes more than their workers, unions and labor advocates arechampioning the SEC's CEO pay-ratio rule. They say disclosureswould help investors identify whether a company's compensationmodel is too top-heavy.

But business groups such as the U.S. Chamber of Commerce andthe Center on Executive Compensation oppose the measure, sayingthe data is costly to compile and would not be useful forinvestors. These critics say investors have little appetite forsuch a measure, citing failed efforts by shareholder activiststo adopt resolutions requiring CEO pay ratio disclosures.

Among the companies with the highest-paid CEOs are Oracle, Walt Disney, Viacom and Starbucks, whose CEOs in 2012 earned between $28 million and $96million, according to the compensation data provider Equilar.

Critics of the rule have urged the SEC to scale it back,possibly allowing companies with global offices to compilemedian pay of workers using only data from U.S.-based employees.

Seeking to strike a balance between opposing viewpoints, theSEC said it would still require companies to includecompensation data for all workers, including those employedoverseas or by subsidiaries, but would give companies moreflexibility in how they calculate the median.

They could, for instance, use a statistical sampling - anoption that the SEC's Chief Economist Craig Lewis said couldhelp reduce compliance costs.

SEC Chair Mary Jo White said the deep divisions over how toimplement this rule were evident in the more than 20,000 commentletters the agency had received on the subject.

"The staff has drafted and recommended a proposal that wouldprovide companies significant flexibility in complying with thedisclosure requirement while still fulfilling the statutorymandate," White said of the plan.

But those efforts did not satisfy everyone at the SEC.

The SEC's newest Republican Commissioner Michael Piwowarunleashed a string of complaints before the vote, saying the SEChas no business even considering the rule.

"Proponents have acknowledged the sole objective of the payratio is to shame CEOs, but the shame from this rule should notbe put on CEOS- it should be put on the five of us," he said.

"Shame on us for putting special interests ahead ofinvestors."

But SEC Democratic Commissioner Luis Aguilar, who supportsthe measure, said: "As owners of public companies, shareholdershave the right to know whether CEO pay multiples reflect CEOperformance."

He added that "Pay ratio disclosure can provide a valuablenew perspective for executive compensation decisions."

Based on an analysis of 2012 data, Equilar found that thehighest-paid CEO was Oracle's Lawrence Ellison with $96.1million.

The CEO ratio pay proposal is one of two major outstandingregulations mandated by the 2010 Dodd-Frank Wall Street reformlaw that the SEC tackled at Wednesday's public meeting.

The unveiling of the CEO pay ratio rule comes five yearsafter the collapse of investment banking giant Lehman Brothers.

The 2007-2009 financial crisis prompted public outrage overhigh CEO pay at Wall Street firms bailed out by taxpayers.Congress passed the Dodd-Frank law in response.

A new report by the left-leaning Institute for PolicyStudies, which analyzed data on the highest-earning CEOs over a20-year period, found that those whose companies collapsed orreceived government bailouts have held 112 of the top 500 slots.

The report said the pay gap between CEOS and the averageAmerican worker has grown from 195-1 in 1993 to 354-1 in 2012.

AFL-CIO President Richard Trumka issued a statement praisingthe SEC's work.

"The simple fact is that large pay disparities between CEOsand their employees affect a company's performance," Trumkasaid. "When the CEO receives the lion's share of compensation,employee productivity, morale and loyalty suffer."

Timothy Bartl, president of the Center on ExecutiveCompensation, said: "The Center strongly opposes the pay ratiorequirement in the Dodd-Frank Act and will continue to work forits repeal in Congress."

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