Controlling by Shaming – CEO Pay

So far nothing has worked. Corporate leaders, chief executive officers, have continued to receive outsized pay checks in spite of the fact that their followers, the rest of us, have become increasingly resentful and restless.  In 2013 median CEO pay among S&P 500 companies was $10.5 million – a figure that since the late 1970’s has climbed over 700 percent.

We’ve been bitching and moaning about income inequity for years, certainly since the financial crisis. But nothing has stopped the tier at the top from continuing to receive compensation that by most reasonable reckonings is outsized. Fifty years ago CEOs were paid on average 20 times more than their employees; by 2013 this figure had vaulted to 300 times more.

Now, after considerable delay and opposition by corporations, the Securities and Exchange Commission (SEC) has voted in a new regulation that might, just might, have an effect on the gulf in income. Beginning in 2017 the new law will mandate that most public companies reveal the ratio of the chief executive’s pay to that of their average employee.

To the degree that this law will have any effect it all, it is likely to be on boards and on activist shareholders, not on ordinary shareholders or on the American people. But, while having the additional information will not start a revolution, here is what it could do. It could be embarrassing. It could embarrass or even shame at least some chief executive officers to have us know – precisely – how much more they earn than do those in their employ.

Confucius wrote about shaming as a means of reining in not leaders, but followers. But the point remains the same: shaming as a way of controlling excesses.

Confucius in Analects:

Lead the people with administrative injunctions and put them in their place with penal law, and they will avoid punishments but will be without a sense of shame. Lead them with excellence and put them in their place through roles and ritual practices, and in addition to developing a sense of shame, they will order themselves harmoniously.

 

 

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