The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Sat, 06 Jun 2026 11:30:34 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Bridging the Pay Divide – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Bridging the Pay Divide https://corpgov.law.harvard.edu/2011/12/29/bridging-the-pay-divide/?utm_source=rss&utm_medium=rss&utm_campaign=bridging-the-pay-divide https://corpgov.law.harvard.edu/2011/12/29/bridging-the-pay-divide/#comments Thu, 29 Dec 2011 15:19:32 +0000 http://blogs.law.harvard.edu/corpgov/?p=24130?d=20150105141400EST Posted by Scott Hirst, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday, December 29, 2011
Editor's Note:

The following post comes to us from Subodh Mishra, Head of Governance Exchange at Institutional Shareholder Services, and is based on an ISS white paper by Mr. Mishra, available, including appendix, here.

Introduction

Investors have for a number of years expressed concerns over pay disparities between that of the chief executive officer and the next highest paid executive at U.S. corporations. The State of Connecticut pension system gave voice in 2008 to these concerns by filing shareholder proposals calling for enhanced disclosure of how internal pay equity factors into the pay-setting process. The targeted corporations were receptive to those concerns and agreed to implement the pension fund’s substantive demands.

Moreover, credit ratings agency Moody’s suggests pay gap multipliers in excess of three times the pay of the second highest paid officer can adversely affect a company’s cost of capital and debt rating. A high ratio between CEO pay and compensation for other named executives can indicate the company is CEO-centric, with associated CEO succession risk, according to Moody’s. [1] The ratings agency acknowledges that high internal pay equity can be a reflection of a CEO’s influence and centrality to a company, though argues “such a large disparity may indicate … concentration of power in the CEO.”

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