Will Dodd-Frank's CEO-worker pay ratio rule put the heat on pharma chiefs?
- Last week, the Securities and Exchange Commission published a final rule requiring publicly traded companies to disclose the pay ratio between their CEOs and their median employees.
- The regulation is part of the 2010 Dodd-Frank financial sector reform law and is slated to take effect on January 1, 2017.
- Healthcare and biopharma chiefs may face some heat once the rule goes into effect, considering that they are among the highest-paid executives in the country.
This provision, and the Dodd-Frank law which contains it, was passed in the aftermath of the Great Recession, when public anger at the corporate world and sky-high CEO pay had reached a fever pitch. As watchdog organizations have pointed out, the average CEO of a top American firm made somewhere between 150 to 373 times what the average worker made in 2014.
When it comes to the biopharma industry, big-name chief executives like McKesson's John Hammergren and Gilead's John Martin make anywhere from $10 million to $25 million in annual compensation (and sometimes much more when factoring in bonuses). That's a massive departure from what even high-paid employees such as pharmaceutical technicians and scientists earn—and that's not even considering far more modest paying, entry-level jobs in the biopharma space.
Most industries have pushed back against the rule, arguing that will be costly to comply and could present a misleading picture of corporate culture. Nonetheless, the provision will be going into effect in less than 18 months.
- Modern Healthcare SEC gives green light to new CEO pay ratio rule