The United States puts a magnifying glass on the "Hungarian" salaries on Wall Street

CEO salaries continue to rise. The US Securities and Exchange Commission (SEC) wants investors to know what they are getting for their money. Starting this week, it will require companies to show how executive pay correlates with shareholder returns and earnings. But with all this obsession with what the few get, it’s easy to lose sight of the bigger picture: everyone else’s salary.

Annual reports will need to show exactly what the company’s top five CEOs have earned, including changes in the value of options and pension plans, along with total shareholder return, earnings, and up to seven other performance metrics. Graphics are allowed, but for those who fear that the lines will go in opposite directions, narrative descriptions are also acceptable.

The chief executives’ feather mattresses must be deflated. According to Equilar, their salaries increased last year by 17% on average. This is despite decades of disclosure reforms, from 1934, when companies had to begin reporting compensation to their bosses, to 2006, when reporting requirements broadened the definition of what constituted compensation, to include non-monetary items.

The US Congress called for these latest changes 12 years ago. But disclosure without liability has limited benefit. Regular voting at shareholder meetings for investors on remuneration is not binding. JPMorgan’s Jamie Dimon and GE’s Larry Kolb watched investors vote they should earn less, but kept their compensation anyway. Plus, investors can now see what CEOs and their immediate peers are being paid, as well as the company’s results.

More useful would be more disclosure of how companies manage their workforce. Employee relations is a topic that BlackRock chief Larry Fink raised in January as a major concern. For now, only US companies have to explain how they manage “human capital,” a term not defined by the Securities and Exchange Commission that leaves plenty of room for interpretation. The result is that companies are selective about the information they disclose. For example, Walmart mentions the average hourly wage of its supermarket employees, but not what it pays them in total. Starbucks mentions the cost of wages in its stores, which is about a quarter of its revenue, but is not paid in other parts of its business. Other countries are asking for more and more useful information. In Hong Kong, companies report compensation to senior management using income ranges. This data is very useful for an investor who wants to know if a company is investing in its workforce or if it is at risk of employee rebellion.

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