What's the Best CEO-to-Worker Ratio?
By Jena McGregor
On Sept. 18, the Securities and Exchange Commission voted to propose a rule requiring companies to disclose the ratio of CEO pay to the average worker's pay within their company. Big business has been fighting the Dodd-Frank rule for years, arguing that the number is either impossible to calculate or irrelevant to investors, while unions and other supporters of the rule think it will be invaluable for shaming companies into lowering their executives' big paychecks.
But now that the rule has been approved, if not finalized, we're left with the question: What ratio is the right one?
Is it 147-to-1, the reported ratio in Germany, the economic powerhouse of the European Union? Is it 58-to-1, the ratio from the late 1980s, according to the Economic Policy Institute, before the stock options craze of the 1990s really got going? Or to be purely arbitrary (if more realistic), should it be 100-to-1?