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Directors overwhelmingly believe the pay ratio rule will have a negative impact, with more than a third believing it will be a boon for gadflies and corporate agitators, according to an Agenda reader survey.
Proposed as part of the Dodd-Frank reforms, the rule will require public companies to determine and disclose the median pay of all their employees and in turn the ratio of the median to the annual pay of the chief executive.
Two thirds of respondents said the rule would have a negative impact, with predictions of its being intrusive, meaningless and a waste of time and money.
Sharon Podstupka, vice president at Pearl Meyer, says the survey results are “very consistent with the rumbles we are hearing in the market.” Podstupka says boards need to figure out how they are talking to the workforce about their global business strategy and the interplay between that strategy and the compensation structure.
“So [it is] helping people globally — whether it is on a regional basis or not — understand how pay is set across the globe,” Podstupka adds. “In the research we have done, one of the things most companies don’t spend a whole lot of time doing outside of the proxy is educating their workforce about how they set relative pay in respect to their peers.”