But that may be what irks Big Business the most about the CEO pay ratio rule. As Meredith Cross, a corporate lawyer who has walked through the revolving door between the SEC and business world at least four times in her career (two stints at the agency’s division of corporate finance, two at the law firm WilmerHale), observed in a recent speech, “requiring companies to post potentially embarrassing information ... can be a very powerful motivator to change corporate behavior. ... There is a significant risk that people will keep pushing for it.”
Mary Jo White, the new SEC chair, is also uneasy about “social” disclosures. In a speech this month, she acknowledged concerns that the SEC‚Äôs independence could be compromised “by those who seek to effectuate social policy or political change through the SEC‚Äôs powers of mandatory disclosure.” Those concerns about social agendas, she said, “resonate with me.”
But she did vote with the 3-2 majority in September to open the CEO pay rule to public comment.
What corporate managements may not want to admit is that the CEO pay rule may help investors after all. Just as investors have a legitimate interest in whether their companies are big polluters, there’s reason to think the ratio of CEO pay to average compensation really is meaningful, as Drucker perceived.