Blogs

In this informative new post: "On Governance: CEO Pay Ratio Planning: 10 Consensuses from Thought Leading Companies," The Conference Board Governance Center Senior Fellow and Society member Jim Barrall identifies and discusses emerging common approaches to pay ratio methodologies and disclosure based on his focused interactions with leading companies. The post effectively aims to help develop consensus around various interpretative issues and disclosure considerations, and assist other companies with their preparation and compliance efforts.

Key takeaways include, but are not limited to:

• Median Employee Pay Tops Concerns - Many companies are more concerned about the median employee pay disclosure and related implications than their CEO pay ratio. (See our recent prior reports on employee communications/messaging here and here.)
• Exemptions - Most companies can't make use of the foreign data privacy exemption, but the de minimis exemption for non-US employees may be helpful and used by companies depending on their particular circumstances.io
• Location of Disclosure - Companies don't plan to include the disclosure in their CD&A unless their Comp Committee takes the pay ratio into account in determining executive officer compensation. The emerging consensus is to include the pay ratio after the Item 402-required disclosures.  
• Scope of Disclosure - Companies are leaning toward a "less is more" disclosure approach subject to specific exceptions, e.g., companies with a large number of non-US employees with very low wages may also disclose a US-only pay ratio
• Supplemental Proxy Materials - Most companies aren't planning to distribute supplemental proxy or other materials as part of the proxy process; however, companies are advised to utilize cross-functional teams to prepare proactive or responsive communications/messaging geared toward employees, customers, investors and others who may react adversely - keeping in mind that any that would constitute proxy solicitation materials need to be filed with the SEC.

Importantly, the post also reminds companies to consider the sustainability of their approach: "Finally, in deciding all of the above issues and selecting their CEO pay ratio computational and disclosure methodologies for their 2018 proxies, companies should make certain that these approaches are sustainable and are likely to be usable for the foreseeable future without substantial modifications."