How Many is Enough? Sample Selection and CEO Pay Ratio Accuracy

In response to considerable client inquiry, we’ve been publishing extensively on the new CEO pay ratio rule. An emerging hot topic is whether using statistical sampling to identify the median employee can simplify the process or trigger additional complexity.

This Issue Brief explains how easy it is to inadvertently select a statistical sample that is too small, therefore failing to meet the burden of representational faithfulness in the SEC’s guidance. Using statistical models akin to those used by the SEC in its economic analysis, we show that sampling may often prove to be more trouble than it’s worth.

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