WASHINGTON (Sept. 13, 11:10 a.m.) — Dan Pedrotty is director of the AFL-CIO's Office of Investment, which focuses on corporate accountability and ensuring that workers have a strong voice in pension funds and capital markets.
Pedrotty joined the AFL-CIO in 2004 as senior strategist for the Office of Investment. He also currently serves as the liaison for AFL-CIO President Richard Trumka to President Obama's Economic Recovery Advisory Board. Pedrotty is a graduate of Dickinson College and Wake Forest University Law School.
Union members participate in benefit plans with more than $5 trillion in assets. Nonunion-sponsored pension plans hold approximately $400 billion in assets.
In an interview with Plastics News, Pedrotty said the levels of CEO pay are way out of proportion with both economic realities and worker pay, and they have skyrocketed to those levels because of a power imbalance between CEOs and the board, and a disconnect between CEOs and the workforce.
Q: Why does CEO pay continue to rise when worker wages are stagnating and the economy continues to struggle?
Pedrotty: It continues to happen because they can get away with it. At the heart of it is a power imbalance. The CEO sits across the table with the people putting together his compensation package, but there is no true bargaining. CEOs are able to dictate the terms of how much of the total corporate treasury they are entitled to receive.
Q: Why does that power imbalance exist?
Pedrotty: All too often, the members of the board of directors and the compensation committee members owe their jobs to the person that they are supposed to be bargaining with. So you see huge pay awards that have no justification.
Q. Will the non-binding shareholder say-on-pay votes that began this year help rein in executive compensation?
Pedrotty: Investors can vote down pay packages in an advisory vote, but that can only have a limited effect and it isn't going to fundamentally alter things because of the power imbalance between CEOs and the boards.
Q. What's needed to alter that imbalance?
Pedrotty: What it comes back to, for us, is the need for independent boards of directors — as 99 percent are re-elected without a competing slate. That is why the proxy access provision of Dodd-Frank to allow shareholders to more easily nominate a slate of candidates is so essential. Without greater independence in the boardroom through proxy access, five years from now we'll be talking about the pay gap just being greater.