The CEO pay ratio disclosure rule and surrounding commentary—all 294 pages of it—takes hold as of the 2018 proxy season. In our efforts to help hundreds of companies prepare for the rule’s inception, we’ve seen certain issues come up again and again: How can we gather so much HR data? What measure of compensation should we use? Is sampling worth it, and how should I do it? Which techniques have helped other companies effectively convey the results to their stakeholders? How should I deal with my employees getting these numbers?
Clear and Simple
The good news is that CEO pay ratio can be disclosed both accurately and in a way that addresses the concerns of investors, employees, executives, and the board of directors. It doesn’t take a lot of complexity—especially when complexity can introduce instability in the calculation year over year. What it does take is a thoughtful plan and methodology, plus a template for execution that doesn’t reinvent the wheel.
As Much or as Little as You Need
Of course, all companies have different needs and data availability. We evaluate multiple ways to identify the median employee, weighing the pros and cons of competing approaches. If you have disparate data sources, we handle the process of normalizing and combining. If you’re unable to access all your data, we can apply statistical techniques such as sampling or distributional analysis to fill in missing data elements. And we can assist with slicing the data in different ways to glean meaningful insights and build supplementary disclosures.
We can roll up all of these services for you or deliver them individually as the occasion demands.
An Expert Resource at Your Side
We also serve as a sounding board to companies who handle their own process, methodology choices, data gathering, calculations, and communications. If that’s your situation, we can help you:
• Understand how recent SEC updates may affect you
• Incorporate best practices for selecting a CACM (consistently applied compensation measure)
• Identify practical ways to gather data for a global workforce
• Evaluate approaches for the proxy disclosure itself, balancing conciseness with telling a clean story
• Review what’s worked for other companies in communicating pay ratio results—be it upward to the board, inward to employees, or outward to other stakeholders
In helping hundreds of companies prepare for the rule’s inception, we’ve seen a number of recurring issues with the contents of the rule, analysis process, and disclosure. Please consider us a resource for insights about the nature of these issues and ways that others have dealt with them.