We use cookies to collect information about how our website is used and to improve the visitor experience. You can change your browser’s cookie settings at any time. Please review our privacy policy for more information. OK
This proxy season, public companies will be required, for the first time, to disclose the ratio between their CEO’s pay and their median employee’s pay—one of the key executive comp rules drafted as part of the Dodd-Frank Act.
At this point, pay ratios should be calculated and boards should have a good sense of what the disclosure will look like, according to several compensation experts interviewed for this article. Most companies are keeping their disclosures short and to the point, says Sharon Podstupka, principal at Pearl Meyer. Board directors should be holding discussions now to determine where the ratio will be disclosed within their proxy’s CD&A, she says.
Boards of companies with “high risk” ratios—1:250 or higher, Podstupka says—should also discuss internal and external communication strategies. “If your CEO pay ratio looks high … what are you doing to prepare internally to make sure you’ve got the right answers to the questions you can expect?” she says.
Some of these questions may include “Why do I earn less than the median employee?” and “Why does our CEO have such a high salary?” Podstupka says.
Moving forward, she adds, boards should ensure their company has a point person monitoring other companies’ pay ratio disclosures throughout the 2018 proxy season and keeping track of “how they stack up.”
“[Having] a good idea of what it might look like year-over-year is going to be really important because that’s going to educate us on what we’ll need to do in 2019 with respect to ongoing proxy disclosure,” Podstupka says.