Pay disclosure hurts employers

Per today's WSJ, the SEC is eliminating a proposed pay disclosure rule:

The Securities and Exchange Commission is expected to scrap or significantly alter part of a proposed rule that would have forced companies to disclose the pay of as many as three "nonexecutive" employees whose total pay exceeded that of the top five officers.

The provision prompted an intensive lobbying effort from businesses, especially executives in the entertainment industry and Wall Street, who feared that competitive information about their star performers would be available for all to see

... Hollywood firms said it would spark battles about top talent.

Employers admit that when employees know what other employees make, employers wind up having to pay higher salaries.

Of course the particular salaries being discussed are only for people who are already making massive amounts of money and for whom its hard to have any sympathy.

But the same economic principles apply to lower level employees, which is why employers keep their compensation data secret. And why I propose a grass roots effort to end the salary taboo.

Patrick McGurn, special counsel to ISS, said, "It was the one thing in the package that we thought was a negative rather than a positive addition. Simply, it would focus so much attention on things that were completely unrelated to what's important to investors,

I'm not so sure I agree. There are cases where non-executive employees get paid such vast sums of money that it does impact the company's profits, and surely investors do care about that.

The SEC should be serving the public interest, which I feel is benefited by more disclosure and not less. The only argument against the disclosure is if it's so onerous that it causes companies to become private because they can't compete as public companies. I doubt that would happen in this particular case.

Comments

[TGGP]

The best thing the SEC could do to serve the public would be to abolish itself.