page498:Managing People: Reporting the Ratio of Executive Pay to Worker Pay: Is it Worth the Trouble?You should summarize the case. Then answer the questions on page 499. Case analysis must be...

MANAGING PEOPLE
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.69 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 further public input. As such, the future of the rule is uncertain.
Supporters of the rule, such as the AFL-CIO labor organization, argue that reporting the ratio will help rein in what it sees as exorbitant (and growing) levels of executive pay, especially 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 feeling 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...