Former fashion jewelry saleswoman Rebecca Gonzales and former Chief Executive Officer Ron Johnson have one thing in common: J.C. Penney Co. no longer employs either.
The similarity ends there. Johnson, 54, got a compensation package worth 1,795 times the average wage and benefits of a U.S. department store worker when he was hired in November 2011, according to data compiled by Bloomberg. Gonzales’s hourly wage was $8.30 that year.
Pay-ratio supporters, led by activist investors and trade unions including the AFL-CIO and the $52.4 billion United Auto Workers Retiree Medical Benefits Trust, say mandatory disclosure would help inform shareholders on advisory say-on-pay votes at companies’ annual meetings.
Investors thought the package “too large,” according to the company’s April 4 proxy. In response, the CEO and the board compensation committee reduced the amounts he qualified for in the early and final years of the eight-year agreement. The committee also tied annual incentive awards more closely to a performance measure called funds from operations and created a peer group of companies for comparing results.
Since then, HR Policy Association representatives have conferred with SEC officials on the pay-ratio rule at least five times and the center has addressed at least four letters to the agency opposing it, the regulators’ records show.
“Companies that can justify the amount that they are paying their CEOs and employees shouldn’t be fearful of the ratio,” Aguilar, a Democrat, said in an interview. Bartl, at the compensation center, responded with a letter asking Aguilar to “retract” his statement.
James Cotton, a retired securities attorney for International Business Machines Corp., may have been the first to propose mandatory disclosure of the CEO pay ratio. He said it would have “a significant impact by either lowering the excessive executives’ compensation or raising the average compensation of employees and managers” in a 1997 article in the Northern Illinois University Law Review. He got the idea shortly after joining IBM in 1970, Cotton said in an interview.
A month later, the company warned she’d lose her job if she didn’t return within 30 days, according to a letter she received. Two weeks later, it wrote again.