Over 300:1. That’s the ratio of CEO to employee pay in the United States. The U.S. leads the world in excessive executive compensation, to the detriment of shareholders. The current system of executive pay distorts incentives, exacerbates income inequality, and leads consumers and employees to think the game is rigged against them.
As You Sow’s Executive Compensation initiative encourages shareholders to use the Power of the Proxy to better control and reduce unjustified CEO pay and to create greater equity in compensation across all publicly traded US companies. Our goal is to help shareholders, including mutual funds, pensions, foundation, endowments, and individuals to create proactive change in a broken system. The initiative will be:
- Engaging shareholders and helping them hold money managers accountable for their votes;
- Pushing companies to develop new social and environmental performance criteria, and working with them to do so;
- Identifying the most overpaid executives, the money managers that approved the compensation plans, the consultants that proposed them, and the compensation committee board directors that approved their compensation packages;
- Encouraging foundations and public funds to adopt stringent voting guidelines to address specific disconnects between pay and performance, as well as the systemic issues that drive the increases, such as peer group selection and inflationary ratcheting up of compensation.
We’ve already co-filed our first shareholder resolution on Executive Compensation at Walgreens. Read more about the resolution here.
From 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period.
In 2014, the median pay for CEOs crossed $10 million dollars. The current system of executive pay:
- Contributes to the destabilizing effects of income inequality;
- Makes investors, consumers and employees wonder if they are playing in a game rigged against them;
- Distorts incentives, leading to a short-term focus rather than sustainable growth for companies.
A recent poll showed that only 18% of Americans think the pay of top corporate executives is appropriate. Yet for the most part, shareholder advisory votes (which are required under corporate reform) give rubber-stamp approval to astronomical executive compensation packages, with average support of over 90 percent.