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A party line, three Democrats vs. two Republicans vote of SEC commissioners has finalized a rule that will require companies to disclose the ratio of the compensation of their CEOs to the median compensation of their employees. This rule is required under the 2010 Dodd-Frank financial regulation law.
Like most progressive policies, this sounds good on its face to most people. “No more fat cats! No more too big to fail!” chants the collective liberal media and political establishment. But, again like most progressive policies, it’s not quite so simple.
People naturally grumble at the idea of some CEO making millions and millions of dollars each year while some employees at their given company are making minimum wage. This makes the idea behind the SEC’s new ratio rule politically popular and an easy sell. The problem is that proper perspective isn’t applied to the issue of CEO compensation. Let’s address a few key points that explain why CEOs are compensated so handsomely in many cases.