Tag: Wealth disparity

Pay and Wealth Disparity Webinar

Pay and Wealth Disparity Webinar

Chris Cox

Good corporate governance, the “G” in ESG, allows for companies to better lean into the challenges and opportunities. Well-governed companies drive change rather than being subjected to it.

Warren Buffett, Chairman and CEO of Berkshire Hathaway, famously described executive compensation as the acid test of corporate governance. For my part, I think the Oracle of Omaha may only be half right. Yes, executive compensation is critical, but it is only half of the picture. The other half of the picture is looking at the wages of the lowest paid, most vulnerable within a company or within its supply chain. It’s a matter of looking not only from the top down, but also the bottom up.

On November 19th, we continued efforts to educate ourselves on issues related to pay and wealth disparity and about some actions we can take to address them. We are grateful that Brandon Rees of the AFL-CIO and Rosanna Landis Weaver of As You Sow joined us to enrich our conversation.

A couple of weeks ago, Tesla CEO Elon Musk made headlines as the first person in history with a net worth exceeding $300 billion. The other part of that story is that, by comparison, the median U.S. worker would need more than 4 million years to make that much.

SGI has a long history in this space. From our founding in 1973, Fr. Mike Crosby has advocated for a living wage. SGI consistently advocates for increasing the federal minimum wage.

In 2013, President Obama said, “Rising income inequality is the defining challenge of our time.” Pope Francis, in the same year, noted, “How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” As a consequence, one of Fr. Mike’s final efforts was a campaign for pay equity in 2014 by filing shareholder resolutions with 12 retailers. SEC allowed companies to omit the resolution based on “micro management.” SGI members continues to challenge retailers and restaurants to pay living wages, for their own workers and for those in their supply chain.

In hopes of building an economy that works for the many, not one that concentrates more and more wealth in the hands of a privileged few, we keep coming back to this issue to see if there are new ways that we can address income and wealth disparity. The Franciscan Sisters of Perpetual Adoration proposal on racial equity & starting pay at the Walmart AGM obtained strong shareholder support for a first-time resolution. SGI members have joined this year’s ICCR campaign to ask restaurants to raise their sub-minimum wage for tipped workers.

Increasingly, economists have come to see that wealth and income disparity harm the economy. Rising concern for pay and wealth disparity in proxy voting and changes at the SEC lead us to think the tide may be shifting, and so we come to today’s conversation to get better informed and to renew our commitment to act.

Again, we are very grateful for the presence of Brandon and Rosanna in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.

Pay and Wealth Disparity Resources:

Pay and Wealth Disparity: Still our greatest social challenge

Pay and Wealth Disparity: Still our greatest social challenge

Chris Cox

By Frank Sherman

Sister Sue Ernster’s (Franciscan Sisters of Perpetual Adoration) proposal on racial equity & starting pay at the Walmart AGM earlier this week obtained strong shareholder support for a first-time resolution (12.5% of total shares or 27% of independent shares voted). Congratulations to Sue and the many ICCR co-filers.

I’m reminded of Father Mike Crosby’s 2015 campaign on income disparity. At that time, President Obama called the growing pay & wealth gap in our country “the greatest social challenge of our time“…. and it hasn’t gotten better since then. We didn’t get very far back then after the SEC’s sided with the companies, permitting them to omit our proposal from the proxy based on the “ordinary business” exclusion.

Starting in 2011, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 required companies to include disclosure of the total compensation of the top 5 paid executives in their annual proxy statements. Shareholders are allowed to cast a non-binding advisory vote for or against these pay packages (“say-on-pay”). Very few companies “failed” their say-on-pay vote in recent years. A failure occurs if the company does not obtain majority support from shareholders for the executive compensation proposal.

The tide may be shifting. Twice as many say-on-pay proposals failed this year as in previous years, including some companies that had never had a failure in these resolutions. As You Sow’s Rosanna Landis Weaver does great work digging through the fine print of the “Compensation Discussion and Analysis” section of each company’s proxy statement with an annual report on the 100 Most Overpaid CEOs. A recent NEI article on CEO compensation (A Promising Start To The Challenge Of Excessive CEO Pay) notes that support for pay packages among S&P 500 firms fell to an average of 87%, down 3 percentage points from 2020 and 2019, and down 4 points from 2016 to 2018. It references a report from the Institute for Policy Studies (Pandemic Pay Plunder: Low-Wage Workers Lost Hours, Jobs, and Lives. Their Employers Bent the Rules – to Pump up CEO Paychecks) which found that 51 of the S&P 500 firms with the lowest median worker wage revised their pay rules in 2020, so that median worker pay fell 2%, while CEO pay rose—by 29%.

Investors pushed corporations to tie their pay packages to stock performance (…to better align management pay with investor returns) in the early ’90s. Little did they know that this would be used by companies to successively ratchet up CEO, and as a result, the rest of management’s, comp packages every year to a level that makes U.S. CEOs stand out on the global stage.

The Dodd–Frank Act also required companies to disclose the ratio of CEO compensation to the median compensation of their employees. The rule has only been in effect since 2017, but the SEC allows companies “substantial flexibility” in the calculation of the ratio, making it difficult for investors and society to make meaningful comparisons.

Of course, CEO’s know that their pay relative to the median pay of their workers is out of control. But even if they wanted to change this (and I’m not sure many “want” to do so), they are reluctant to be a first mover on restructuring pay because it would “negatively impact retention and make them less competitive”.

As we complete the next draft of SGI’s strategic plan and think about our engagement focus for the 2022 season (which starts this summer), I believe pay disparity has to be high on our list. I hope you concur.