The Washington Post:
Thousands of public U.S. companies are likely to soon be forced to share a number many would rather keep under wraps: how much more their chief executives make than their typical rank-and-file employees.
The Securities and Exchange Commission is expected to finalize on Wednesday a long-delayed rule forcing businesses to share their “pay ratio,” a simple bit of arithmetic that would cast an unprecedented spotlight on one of corporate America’s thorniest debates.
Once the pay-ratio rule is in place, millions of workers will know exactly how their top boss’s payday compares with their own, revealing a potentially embarrassing disparity in corporate riches that many companies have long fought to keep hidden.
Companies already disclose the pay of their chief executives, although not how it compares with that of personnel. Most Americans still drastically underestimate how wide that wealth gulf has become. In a Perspectives on Psychological Science study last year, researchers found that Americans estimate the pay gap between executives and unskilled workers is about 30 to 1, when in reality it’s more than 300 to 1, a misunderstanding that Harvard Business School professor Michael Norton has said can make people less likely to fight the gap.
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