Saturday, August 8, 2015

The SEC’s Newest Financial Regulation Is Based Purely on Envy

By Kevin D. Williamson

The Securities and Exchange Commission ought to stick to regulating securities and exchanges. Instead, the Wall Street regulator has gone full social-justice warrior, enacting a new rule that would require companies with shares trading on the stock exchanges to annually publish figures calculating the ratio of executive pay to median worker pay. Despite the silly claims to the contrary, the rule, part of the deluge of new regulations promulgated under Dodd-Frank, does nothing at all to serve the interests of investors, or any other public interest. It is simply part of a campaign of political intimidation intended to force American business to adopt the preferences of American politicians.

Consider an obvious comparison: Ginni Rometty is the CEO of IBM, and Steve Easterbrook is the CEO of McDonald’s. Both are Fortune 500 companies, and they have roughly the same number of employees, 420,000-ish. The chief executives’ base salaries aren’t too far apart: $1.1 million for the gentleman from McDonald’s, $1.6 million for the lady from IBM. Easterbrook makes a half-million a year less in base salary than does Rometty, but it’s a safe bet that the median McDonald’s employee earns a good deal less than the median IBM employee’s roughly $90,000 a year. Which means that CEO with the lower pay in this case almost certainly makes a dramatically higher multiple of his median worker’s pay than does the higher-paid CEO.

Read the rest here.

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