Policies should be passed that give shareholders greater control over "excessive CEO pay," according to a new paper from the Economic Policy Institute.
The EPI, a non-profit think tank in Washington that aims to include the needs of low- and middle-income workers in economic policy discussions, published the paper June 4. The paper said the CEO-to-worker pay ratio was 312-to-1 in 2017, while the average CEO pay at the 350 largest firms was $18.9 million.
The paper said "empowering shareholders to rein in excessive CEO pay is obviously not sufficient to make for a fairer economy, but it is useful."
The authors said that to boost shareholders' power, fundamental changes to corporate governance have to be made, like providing worker representation on corporate boards.
The paper also said tax policy that penalizes corporations for excess CEO-to-worker pay ratios can boost incentives for shareholders to restrain excess pay.
"We have an economy that has been structured to put considerable pressure on ordinary workers, preventing them from getting their share of the gains from growth over the last four decades — while CEOs have not been subject to the same kind of pressure and their pay has been allowed to grow unrestrained," the paper said. "We should end the corruption of a corporate governance system that fails to subject CEO pay to the same labor market pressures everyone else is subject to."
According to an analysis of 724 Russell 3000 companies from Willis Towers Watson, as of May 10, say-on-pay proposals, which provide shareholders with a voice in executive compensation, garnered 91% average support this proxy season.
