Comp Experts: CEO Pay Ratio Triggered Fresh Investor Questions, Possible Legislation – CorpGov
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Comp Experts: CEO Pay Ratio Triggered Fresh Investor Questions, Possible Legislation
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Comp Experts: CEO Pay Ratio Triggered Fresh Investor Questions, Possible Legislation

Compensation Advisory Partners Associate Ryan Colucci and Founding Partner Melissa Burek

By John Jannarone

100x? 1000x? The ratio of CEO compensation to median employee income can be a staggering figure – one that some companies feared would cause uproar among staff and journalists when they were widely reported in public filings over the last year. But while few companies saw people lining up with pitchforks, the disclosures did train a focus on compensation details that may prompt more shareholder requests and even legislation.

That’s according to a recent note by Compensation Advisory Partners, which provides advice on executive pay to boards and senior management teams. In an interview with CorpGov, Melissa Burek, a Founding Partner at the firm, explained that investors have begun to seek information about a range of “human capital” data after seeing the depth of detail some companies have provided.

“CEO pay ratio was one component, but then there’s gender pay,” Ms. Burek said. “Legislation could come of this.”

The CEO pay ratio disclosure, required under Dodd-Frank, has prompted nearly all S&P 500 companies to disclose figures. By the end of 2018, shareholders including the Office of the New York State Comptroller along with a separate group of 48 institutional investors began to press companies for more detail about corporate workforces. Companies that have responded to the NYSC and reached agreements include CVS Health, Macy’s, Microsoft, Salesforce.com, and Discovery.

In Discovery’s case, the company went into detail about the geographical breakdown of its workforce – something that was apparently new to investors and could prompt requests for similar details at other companies. Ms. Burek says investors will naturally want more information now that they know it exists. “Companies have it and they know it,” she said.

The pay ratio itself may not generate much more attention. Rather, the questions seem to center on the workforce at large. “They wanted to see a breakdown of things like full time and part time,” Ryan Colucci, an Associate at Compensation Advisory Partners, told CorpGov.

It’s unlikely any sweeping changes to disclosure will come this year, but demand from large investors could soon translate to legislation. “We suspect that the requests in these shareholder letters, combined with some of the requests in shareholder proposals around gender pay equity, may serve as a basis for new legislation from the Democratic majority in the House of Representatives requiring disclosure of workforce demographics and pay equity statistics,” the firm wrote in its note.

 

Contact:

John Jannarone, Editor-in-Chief

www.CorpGov.com

Editor@CorpGov.com

Twitter: @CorpGovernor

 

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