As the middle class is shrinking, the gap between the very wealthy and the poor has grown at an alarming rate. One indicator of income inequality is the indefensible expansion of CEO and top executive pay at major public corporations compared to the relatively stagnant wages of working class Americans.
Patriotic Millionaire Stephen Silberstein is leading an effort to shine a light on exorbitant pay packages through a shareholders resolution at BlackRock Inc., one of the largest fund managers in the world and all of the funds that BlackRock manages are collectively a major shareholder of many companies.
“It is time for American investors and financial managers like BlackRock to do what other financial fiduciaries are doing,” Silberstein said. “Step up to the plate and do the patriotic thing to help American businesses: stop approving these outrageous, high cost, unproductive, and wasteful American CEO pay packages.”
Under the regulations for public companies by the Dodd-Frank Act, the Securities and Exchange Commission (the SEC) has implemented “Say to Pay” rules. This requires that public companies must periodically have a shareholder vote to approve the compensation of its top executives.
Silberstein’s resolution would mandate that BlackRock issue an assessment on how to evaluate performance of the top executives for the companies in which they are shareholders in accordance with the new “Say to Pay” rules by the end of 2016. Going forward, it would be up to BlackRock’s management and shareholders whether or not they should change their practices to reflect their new rights as shareholders based on the information gathered.
The goal is that BlackRock as a shareholder could then see for themselves what the massive compensation packages at the companies in which they have invested are actually funding. Silberstein is confident that the report will inevitably show that it is in BlackRock’s interest to determine if the the executives of the companies in which they are invested are being overpaid for under delivering. Furthermore, BlackRock would be exercising their fiduciary responsibility to its own stakeholders to make sure that it is wisely investing their money.
Companies in the United States which are owned by shareholders and have issued shares which are tradable on the stock market are called public companies, meaning that any member of the public could own part of the company. Most (but not all) large companies are public, including Apple, Exxon, Microsoft, Wells Fargo, etc.
“Because American corporations pay their CEOs so much more than corporations from other countries (like Germany, France, England, Sweden, Japan, China, etc.),” says Silberstein, “American corporations (with their extremely high CEO pay costs) are less competitive in the marketplace. Because Blackrock approves these out-of-line CEO pay packages, it is, by virtue of its actions, contributing to the decline of American businesses.”
Former BlackRock Managing Director and Patriotic Millionaires Board Chair Morris Pearl agrees, saying “Given that the innocuous resolution only says that the board of BlackRock should issue a report which explores the idea of making the companies in which it invests to defend the current level of executive pay, I am surprised that management is opposing it.”
On May 25th, when the resolution is put to vote, Silberstein is hoping that BlackRock will put the best interest of its shareholders first by agreeing to study executive compensation metrics.