Jean Eaglesham and Francesco Guerrera of the Financial Times have written a report on the impact of new CEO pay disclosure requirements, which I found via CNET’s Declan McCullagh:

“We’re not debating the concept of disclosure – we think it’s a good thing,” said Larry Burton, executive director of the Business Roundtable, which represents chief executives of the biggest US companies. “But you can do more harm than good if you take a well-intended piece of policy and implement it badly. That’s the risk here.”
The rules’ complexity means multinationals face a “logistical nightmare” in calculating the ratio, which has to be based on the median annual total compensation for all employees, warned Richard Susko, partner at law firm Cleary Gottlieb. “It’s just not do-able for a large company with tens of thousands of employees worldwide.”

But leaving aside the logistical nightmare, the law creates a powerful incentive for firms to shed responsibility for low-wage employees:

The rule could also reward with a relatively low ratio those companies that outsourced low-paid work rather than keeping jobs in-house, lawyers said.

As Douglas Massey and Julie Phillips observed in the context of IRCA, the immigration law that established an employer verification system, subcontracting has some serious downsides:

Under subcontracting arrangements, a U.S. citizen or resident alien contractually agrees to provide an employer with a specific number of workers for a certain period to undertake a defined task at a fixed rate of pay per worker. Neither the subcontractor nor the workers are technically employees of the firm or person entering the contract, so the employer avoids IRCA’s burdensome paperwork requirements and escapes liability under the law. In return for providing this legal bugger, the subcontractor retains a portion of the workers’ wages as payment.

The Massey-Phillips paper was published in 1999, and it is entirely possible that a focused staffing organization might prove more productive than an in-house custodial unit at a large multinational firm. The fact that the staffing organization gets a cut isn’t necessarily a bad thing. It does suggest, however, the pay law might accelerate an outsourcing trend that many critics of U.S. corporations have long considered objectionable.