Regular Americans get fired if they fail at their jobs (and sometimes, for no reason at all but downsizing). Disgraced CEOs, on the other hand, are allowed to gracefully “resign” even when they could legally be fired, and often get insanely lucrative golden parachutes when they do.
It’s time to pay attention, and vote accordingly
Many investors disregard any information provided by unions, but the lack of discourse between different groups these days is unproductive. Whether you agree with the AFL-CIO in general or not, its data raises a legitimate cost to contemplate. Some of these gigantic paychecks are difficult to justify, especially when you start drilling down on data that’s easier to conceptualize, like hourly salary calculations.
Meanwhile, when it comes to shareholder returns, companies with such lucratively paid CEOs don’t always provide great returns on investment, particularly when one digs beyond stocks’ movements, which are often affected by external factors. How much growth in sales, profit, and other metrics gives a better picture of business health as opposed to short-term-sensitive measures.
The Dodd-Frank Act recommended a new disclosure mandate, which would compel companies to provide investors with the ratio of CEO pay to the average pay of their own employees. I’m hoping the day will come when that more specific data will be available to help inform our say-on-pay votes at the companies we own.
Until then, let’s pay attention to this ratio that insults our intelligence — and sometimes, our investment returns. This is shareholder money — your money — after all.
The article A Ratio That Insults Investors’ Intelligence originally appeared on Fool.com.
Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, General Electric Company, and Oracle.
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