"2018 Proxy Season: Early Trends in Pay Ratio Disclosure" from Compensation Advisory Partners provides an overview of pay ratio disclosure practices based on the firm's review of 150 company proxies reflecting a cross-section of industries and median revenue of $2.1B filed as of March 9th.
Among the key takeaways:
- Pay Ratio: Pay ratio correlates with company size, with larger companies disclosing higher ratios, and CEO pay being the greatest variable depending on company size and complexity. The median ratio for this 150 company group ranged from 20x for companies with revenue <$500M to 218x for companies with revenue >$15B.
- Supplemental ratios: Just 15 companies disclosed a supplemental pay ratio, with only three companies disclosing more than one. Supplemental ratios typically exclude anomalies from CEO pay, e.g., one-time special bonus or equity award.
- Location: Nearly 70% of companies disclose the ratio after the Potential Payments upon Termination or Change in Control section; approximately 25% disclose it just before or after the Summary Compensation Table; and 5%, disclose it in the CD&A.
- Comparability disclaimer: About 25% of companies include language to the effect that the ratio shouldn't be used to compare pay levels to other companies within the industry, region of the country or revenue size. (See sample disclaimer language for consideration in yesterday's Society Alert.)
- De Minimis & other exemptions: Of the approximately one-third of companies that excluded some of their workforce when determining the median employee, approximately 55% relied on the de minimis exemption. Other common bases for excluding employees are an acquisition or lack of responsibility for pay-setting (e.g., independent contractors).
See also this CFO.com article: "Pay Ratio Disclosures Mislead Investors," our Pay Ratio reports in yesterday's Society Alert: "Pay Ratio Observations, Expectations & Guidance," "Pay Ratio Survey: Most Companies Taking Minimalist Disclosure Approach," "Pay Ratio Disclosure Trends Include Lack of Comparability 'Disclaimer,'" "CEO Pay Ratio Checklist & Practice Tips," and numerous additional resources on our Pay Ratio topical page.