Companies Are Gearing Up for the CEO Pay Ratio Disclosure, Except When It Comes to Communications

Oct. 26, 2017 — More than half of companies required to disclose their CEO pay ratio have completed a pro forma calculation, but nearly three-quarters haven't had any board discussions about communicating the information.

"While more companies are now completing their analysis, attention has to turn to messaging and how to mitigate any potential negative reactions," said Sharon Podstupka, principal at Pearl Meyer, in a press release issued by the firm.

Pearl Meyer released its "2018 Looking Ahead to Executive Pay Practices" survey, which found that 58% of companies have completed the pro forma calculation, but 73% haven't had board discussions on communication. In a separate survey conducted by Pearl Meyer in March, 57% of respondents said CEO pay-ratio disclosure will have a negative effect on their workforce.

"The CEO pay-ratio disclosure casts a new spotlight on compensation, and management must provide their boards with a summary of how the company will be prepared to address the concerns that may arise from multiple stakeholder groups," Podstupka said.

Other key findings:

  • 13% of directors surveyed indicate their board has talked about the required disclosure of the ratio for the Compensation Discussion & Analysis (CD&A) in their 2018 proxy statement.
  • 11% said they have discussed both internal and external communication.
  • Companies in technology and health care/pharma/biotech appear to be most prepared in their communication, with 44% in each industry reporting some level of board discussion.
  • 42% of companies are projecting a CEO pay ratio between 101:1 and 250:1, while 18% expect a ratio of 251:1 or higher.

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