SB 1208 Requires Corporations to Disclose Top Retired Executive Compensation
Bill Update: The bill is now dead. With a valiant effort from consumer advocates and Senator Mark Leno, SB 1208 was able to pass through the Assembly Judiciary Committee on a 6-2 vote, the Assembly Appropriations Committee (9-4), and made to the Assembly Floor before losing out on a 32-36 vote. It had previously won approval on the Senate Floor with a vote of 21-15 and had passed through the Senate Judiciary Committee with a 4-1 vote.
CFC Position: Support
The Corporate Executive Retirement Sunshine Act, SB 1208 (Leno), was approved by the Senate on May 30th. Sponsored by the Consumer Federation of California, this bill requires publicly traded corporations to report the amount of money their top five highest paid retired executives receive.
Financial commitments made to top corporate executives when they retire are not just one-time payments – they literally continue for a lifetime. This bill arms shareholders and consumers with critical information that will shed light on whether huge increases in executive retirement compensation at corporations across America are truly warranted and sustainable.
In recent years, CEO pay at corporations across America has grown exponentially, while wages for workers have remained relatively stagnant. The average CEO of a large corporation in 1980 made about 42 times more than the average worker. By 2011, that disparity had grown to 343 times the pay of the average worker. In actual numbers, average yearly compensation for a top executive at a large corporation in the early 1980s was about $850,000. In 2010, it had skyrocketed to $11.8 million. Average worker pay has hovered around $30,000.
Much of this increased executive pay comes in the form of incentive compensation, which rewards an executive for performance while on the job. Until recently, many companies did not allow incentive pay to be added to an executive’s base salary for the purpose of calculating retirement benefits. Companies now have chosen to add incentive compensation to the calculation, exponentially increasing the amount of money executives and their families are paid every year for the rest of their lives.
If approved, SB 1208 would be the first law in any state requiring publicly traded companies to report a dollar amount of retirement compensation, rather than the much lower prediction of what they might earn. The information will be posted on the Secretary of State’s website, along with current top employee compensation figures.