Homework answers / question archive / Step 1 Read and watch the following 1) Read the Case Study in Chapter 11 of your textbook on page 518-519 "Reporting the Ratio of Executive Pay to Worker Pay: Is It Worth the Trouble"

Step 1 Read and watch the following 1) Read the Case Study in Chapter 11 of your textbook on page 518-519 "Reporting the Ratio of Executive Pay to Worker Pay: Is It Worth the Trouble"

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Step 1 Read and watch the following

1) Read the Case Study in Chapter 11 of your textbook on page 518-519 "Reporting the Ratio of Executive Pay to Worker Pay: Is It Worth the Trouble".

 

Reporting the Ratio of Executive Pay to Worker Pay: Is It Worth the Trouble?

 

Section 953(b) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act requires covered companies to report the ratio of annual total compensation of the chief executive officer (or any equivalent position) to the median of the annual total compensation of all other employees. In August  2015,  the  Securities  and  Exchange  Commission (SEC) provided rules for companies to follow in computing and  reporting  the  ratio.71  However,  following  President Trump’s election, on February 6, 2017, the acting chairman of the SEC stated “I have ... directed the staff to reconsider the implementation of the rule” until the SEC receives fur-ther  public  input.  As  such,  the  future  of  the  rule  is uncertain.Supporters of the rule, such as the AFL-CIO labor organi-zation, argue that reporting the ratio will help rein in what it sees as exorbitant (and growing) levels of executive pay, espe-cially when compared to what has happened to worker pay. According to an analysis of S&P 500 firms by the AFL-CIO, the ratio of CEO pay to typical U.S. worker pay rose from 42 in 1980 to 380 more recently. The AFL-CIO and other supporters of the rule hope it will also encourage boards of directors to consider whether worker pay, which has grown more slowly than inflation (and  as  indicated  above,  much  more  slowly  than  CEO pay),  should  be  higher.  The  AFL-CIO  also  argues  that research shows that larger pay differentials between CEOs and rank-and-file workers lead to poorer firm performance due to perceptions of inequity and the negative effects that has on worker morale and productivity. There is also a feel-ing that when CEOs get paid as much as they do, too much credit goes to them for a firm’s success and not enough to other employees.Many companies see things differently. David Hirschmann, head of the U.S. Chamber of Commerce’s Center for Capital Markets, says the ratio is not meaningful or helpful to inves-tors and will instead be used as “a political tool to attack com-panies.” Companies argue that with a global workforce and different payroll systems in different countries, computing the ratio is much more difficult than it would seem. For example, the  consulting  firm  Accenture  has  246,000  employees  in 120 countries and a variety of payroll systems (and defini-tions  of  pay  in  different  countries).  Jill  Smart,  head  of human resources at Accenture, says that the work required to compute the ratio of CEO to worker pay would be “quite incredible.”Other companies, however, are already doing it and have done so for years. They say it is not that difficult or costly. Whole Foods, for example, capped the ratio of executive to front-line worker pay at 19 about a decade ago. Mark Ehrnstein, a vice president there, says that it does not take months, but rather a few days, and that it does not cost “millions of dollars” to calculate the ratio.

 

 

2) In 2019, CEOs of S&P 500 companies received, on average, $14.8 million in total compensation.  The average S&P 500 company CEO-to-worker pay ratio was 264-to-1.

Analyze the CEO salary to employee pay ratios from this website:

https://aflcio.org/paywatch/company-pay-ratios (Links to an external site.)

3) Watch the following video:

https://youtu.be/Ok--Ge2EKVc (Links to an external site.)

Step 2 Post the following.

Respond to the following, and if appropriate, include personal experience as part of your answers.  Cite your resources and put quotation marks around direct quotes to support your opinions.  You may also refer back to the previous assignments to support your opinions.

• Do you believe it is an undue burden on companies to compute and report the ratio of chief executive compensation to employee compensation?  Why or why not?
• Do you believe reporting this ratio will result in changes that benefit companies, employees, or society?  Explain.
• According to the website above research 2 different company's pay ratios and report the following for EACH: company name, CEO total salary, median worker pay, CEO vs. median employee pay ratio, why you chose these companies.
• Provide a one to two sentence summary with your biggest insights or take-away from this information (ie: what's fair, what's unfair, what can be fixed, etc).