Teamsters

North America's Strongest Union

It's time for Congress to move on CEO pay reform

The Teamsters have taken a stand against excessive pay at McKesson.

While Americans may differ on the remedies and solutions, most agree that income inequality is a very real problem with devastating effects for families and communities across the nation. And the Teamsters have been active in challenging lawmakers and companies to change it.

CEOs are paid more than 300 times the average worker. In good times or bad, CEOs are coming out on top. When companies struggle, workers bear the brunt – not so for all too many bosses who chase short-term unsustainable goals, inspired by exorbitant sums of cash, equity and perks. The direct effects are clear – lack of investment going back into companies for employees, research and development, destruction of morale and motivation for front-line workers and a dangerous always escalating expectation of compensation at the top. Long-term shareholders such as pension funds suffer as companies can't sustain growth, creating more risk and uncertainty for working families.

The Teamsters are taking corporations to task on these issues. In fact, the union is currently sponsoring a shareholder proposal at McKesson that would address the automatic accelerated vesting of equity awards for top executives in the event of a change of control. At the center of the controversy is the company's CEO John Hammergren, formerly listed as as the nation's highest paid chief executive.

Hammergren's compensation is especially egregious given that many employees earn wages so low they can't contribute in the company's health or retirement plans. As Teamsters General Secretary-Treasurer Ken Hall said:

McKesson should ensure that front-line employees can afford health care and a secure retirement before lavishing hundreds of millions in unearned compensation to a handful of highly paid executives. Guaranteeing windfall payouts to top executives on their way out the door does not benefit shareholders over the long term.

The Dodd-Frank Act of 2010 recognized this problem and created a mandate for publicly traded companies to disclose the ratio of CEO pay to the median company employee’s pay. Such disclosure could provide shareholders crucial insight on risks related to their investment. The Securities and Exchange Commission (SEC) to date has not implemented a rule despite receiving wide-scale public feedback on their proposed rule.

It is now five years since the passing of Dodd-Frank. Despite various pronounced timelines from the SEC that always end up being pushed back, the U.S. still has no rule, no disclosure and no end in sight for the growing pay disparity at American companies. This rule and others regarding executive compensation remain the glaring loose end from the financial reforms that came about to address the issues which lead to Great Recession.

While this disclosure alone cannot resolve income inequality in our country, it can help identify a huge source of the problem and inform how we want to shape compensation in corporate America. We as a nation cannot afford to wait any longer and the SEC must play its part.

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