As of 2011, the average CEO was paid 230 times the salary of an average worker at his company. Today, the SEC proposed a rule to require companies to report that ratio every year. What should it be? A modest proposal: 100-1.
The SEC's rule is little more than an attempt to shame public companies into bringing the ratio under control, somewhat. Although it does contain some wiggle room, the mere fact of its existence has garnered outrage from corporate lobbyists. Assuming that one day soon companies do have to report this ratio, what should the public think about it? What sort of number should a society like ours deem to be respectable?
It depends on whether you embrace the crass, cutthroat capitalist vision of our society (objectively true) or the fair, democratic, equality-driven vision of our society (something to work for). Most working people, I'd wager, would feel that a ratio of 230-1 goes against common fairness. To put that figure in perspective: in 1965, the ratio was more like 20-1. Also: "From 1978 to 2011, CEO compensation increased more than 725 percent, a rise substantially greater than stock market growth and the painfully slow 5.7 percent growth in worker compensation over the same period."
The rising economic tide has not lifted all boats. It has lifted the CEO's yacht, and left the workers bailing like hell to stay afloat. Ideally, we would tie worker pay to executive pay. The maximum ratio would be enforced by law. In order for those at the very top to enrich themselves more, they'd have to raise the wages of their employees. Companies would no longer be able to pay minimum wage to many of those at the bottom and tens of millions to those at the top. All the happy corporate talk about "team members" would finally mean something real.
That, I'll admit, is a dream, for now. But this disclosure requirement will soon be a reality. If we were speaking purely in terms of what might be considered a "fair" or "just" range of wages, I'd say that the maximum ratio of CEO pay to worker pay should be something like 10-1. In a nod to the current political realities, though, I propose a more modest target for what is considered a maximum "fair" ratio: 100-1.
A CEO can make one hundred times the annual salary of an average worker. Not 100 times the salary of his lowest-paid worker, but 100 times the average salary of his workers, which is quite a bit more. Hell, this should be a generous enough ratio for many CEOs to make over $5 million, which is more money than anyone needs to make, anyhow. A ratio of 100-1 is close enough to the current (gross, exaggerated, plutocratic) ratio that it is achievable without anyone at the top being able to cry about it too much; after all, it's still five times higher than it was in The Good Old Days When America Was Great. Then again, cutting the current ratio more than in half would be a significant step in the right direction, and, more importantly, would serve to raise worker wages, making everyone that the CEO claims to care so much about happier and more equitable. It also has the advantage of being easy to remember and understand, with very few math skills.
A hundred to one. It's still a huge gap, but it's a start. And despite its laxity, it's a benchmark that most companies still will not reach without heaping portions of public shame being poured upon them. So we look forward to the release of those ratios.
[Photo of Rex Tillerson (2012 compensation: $40 million): AP]