Under acting head Michael Piwowar, the Securities and Exchange Commission has signaled a desire to reconsider Dodd-Frank rules. Specifically on the table is the requirement that corporations disclose the pay gap between their chief executive’s compensation and that of median workers. This runs counter to what the American people want.
JUST Capital’s research has shown that Americans – including active investors – are highly in favor of transparency from companies, especially on issues of pay, for both executives and the average worker. In fact, “pays workers fairly compared to the CEO,” was called out explicitly as an important component of the JUST 100 Index.
At JUST Capital, we assess company performance on all the things the public tell us they care about. On this particular issue, JUST Capital analysts have estimated the CEO: Median US Worker Pay ratios for all companies in the Russell 1000. The average across all represented industries is 236.0 to 1.
Variability among industries is substantial, from Internet and Software (where the average pay ratio is roughly 118:1) to Consumer Services (almost 500:1).
However, within industries things get even more interesting. Take the Capital Goods sector for example. Here, Fastenal (FAST) has a ratio of just 48 to 1, whereas SolarCity Corporation (SCTY) comes in at a whopping 602:1 (Note: SolarCity was acquired by Tesla in November, 2016. Elon Musk is CEO of both companies). GE comes in second, at 518:1.
In the Banking sector, JP Morgan tops the charts at 635:1, with Zions Bancorporation at the low end with a ratio of just 60:1. To be fair to JP Morgan, it’s worth noting that their wealthier investment banking brethren are included under the Capital Markets sector, and not Banking.
According to The Wall Street Journal, “[c]ompanies complain the metric…isn’t informative to shareholders,” yet our market research has shown us that 96% of Americans believe it is important to measure how just corporations are.
In addition, 87% of Americans would use information about justness when looking for a job, 84% would use it to inform purchasing decisions, and yes, 85% would use it to inform investing decisions.
Regardless of any decisions at the SEC, JUST Capital will continue to compile this data.