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The federal Securities and Exchange Commission (SEC) proclaims that its mission “is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” All Americans have an interest “in a growing economy that produces jobs, improves our standard of living, and protects the value of our savings.” This means that “all of the SEC’s actions must be taken with an eye toward promoting the capital formation that is necessary to sustain economic growth.” But a new SEC plan raises some questions about those claims.
As one report notes, the SEC has a plan that would “require companies to disclose how much more their chief executives are paid than their other employees.” More specifically, all public companies could have to disclose the total compensation of their chief executives, the median compensation of all other employees, and the ratio between the two. This mandate may be found in the 2,300-page Dodd-Frank Act. An AFL-CIO official hopes it will “have a moderating effect on CEO compensation.” Companies regard it as another burdensome imposition that serves no purpose. That is doubtless true, but the plan is rich in irony.
Barack Obama’s SEC boss is Mary Jo White, a former prosecutor recently employed by Debevoise & Plimpton, where she defended companies the government accused of white-collar crime. The Washington Post noted that White’s clients have included “Wall Street titans” and that White recently said that it’s important to “not bow to the frenzy” that seeks criminal penalties against Wall Street executives.
Recall also that Obama’s pick for Treasury Secretary is Jack Lew, formerly a big-shot at Citi Alternative Investments. Lew bagged a cash bonus of nearly $1 million on top of his $1.1 million salary, and the bonus came just before the federal government bailed out Citigroup to the tune of $301 billion. The bonus also came during a time of job losses and economic hardship for millions of Americans.
The SEC pay-ratio surge will not help anybody find a job. On the other hand, it won’t promote capital formation or economic growth. A better theme for detailed public revelation would be the gap between the gold-plated pay and benefits of federal government employees and those of the taxpayers who fund them.