US companies begin to disclose CEO-employee pay ratios

Proxy statements filed in 2018 by US public companies have to include information about CEO and median employee compensation.

US public companies filing proxy statements for the last financial year must include disclosures about the compensation of their CEOs versus average employees.

This follows a ruling put in place by the US Securities and Exchange Commission in 2015, but which has only now seen final implementation. The ruling itself takes its cue from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

With this mandate, US companies must report the following figures:

(a) The media annual total compensation of employees (except the CEO)

 (b) The annual total compensation of the CEO

(c) The ratio of (b) versus (a)

As reported by Human Resource Executive, HR leaders are preparing for potential blowback as the compensation ratios are made public, as signs indicate that the mandate might be “more trouble than it’s worth”.

“Hopefully organizations have communicated their compensation and broader employee value proposition, about how they’re compensated and rewarded, all along,”Gregg Passin, senior partner and North America executive rewards practice leader at Mercer, told Human Resource Executive.

“For those that haven’t, leadership needs to figure out how to properly contextualise this information,” he added.

One of the highest pay-ratios reported so far is from multinational fruit-and-vegetable distribution corporation Fresh Del Monte Produce, whose CEO made almost 1,500 as much as the company’s median worker (S$11.2 million versus S$7,700).

At Honeywell, CEO Darius Adamczyk, was paid 333 times more than the median employee (S$22 million versus S$66,000).

In a survey of 356 companies, data firm Equilar found that the median CEO pay ratio was 140:1.

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