There's been a lot of talk lately about bedbugs. It seems that they are swarming over the nation. My research indicates that there are two distinct species of bedbugs: the kind that inhabits mattresses and the suitus gluttonus, commonly known as the "overpaid CEO." Like their more diminutive cousins, corporate moochers have been pervasive, much-discussed, but rarely successfully fumigated.
Well folks, a form of regulatory DDT has arrived. To the surprise of pretty much everyone, it emerged last week that the Dodd-Frank financial reform bill actually addresses this long-neglected infestation of the capitalist system. The Financial Times picked up on this overlooked executive aspect of the financial reform bill and created a sensation, with an approving editorial in the New York Times and predictable exclamations of horror from the business community.
"Logistical nightmare!" the corporate types are screaming. Someone from the Business Roundtable told the FT, with oozing condescension, that "you can do more harm than good if you take a well-intended piece of policy and implement it badly." Goodness, we can't have that. So what are they getting steamed about? Are executive perks being de-perkalated? Are the limos being e-limo-nated? Are shareholders to directly vote on executive compensation, God forbid? No, all that's being talked about here is actually telling people stuff.
The new rule in Dodd-Frank, details of which will be hammered out by the Securities and Exchange Commission, requires that public companies disclose the ratio between their CEO's pay packages and the wages of their typical employee. There is now much agonizing about that. Shall they include outsourced employees in Bangalore? Etc. etc.Given the anemic quality of much of Dodd-Frank, I was stunned when I heard about this new requirement, as it is revolutionary. It tackles head-on one of the true social inequities of recent decades, which is the spiraling disparity between the rich and the not-so-rich. It has come to be known as the "plutonomy," a term coined by a Citigroup (C) analyst, in a 2006 report that cheerfully described how middle-income people saw their real incomes increase by one-fifth between 1979 and 2004. During that same period, the real income of the top 1% climbed 179%. Thanks to the Reagan-Bush tax cuts, the new grandees shared an ever-shrinking portion of their take with the IRS. This obscure provision of Dodd-Frank is therefore less an executive-comp disclosure provision than a window into the ever-gaping class differences in contemporary America. When implemented, it will show how stratified, calcified and just plain immense is the gap between the executive suite and the cubicles downstairs. It will give every worker bee in America a good idea of just how much they're being shortchanged -- and, perhaps, educate shareholders on just how much the CEOs grinning from annual reports are getting fat while they're throwing their people into the street.
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