February 16, 2016
Pay Ratio: NorthWestern Energy’s 2016 Disclosure
– Broc Romanek, CompensationStandards.com
Recently, NorthWestern Energy filed its preliminary proxy statement – which includes two different pay ratios for 2016 – one based on how they’ve previously calculated the ratio (the ‘NorthWestern Calculation’) – and another which they believe will meet the future SEC requirements (the ‘Dodd-Frank Calculation’). The company also disclosed a pay ratio last year.
Interestingly, the pay ratio actually dropped considerably using the Dodd-Frank Calculation: Dodd-Frank = 19:1. NorthWestern = 26:1 (it was 24:1 last year). I think the primary reason for the difference is that their officers receive the same benefits as employees. The NorthWestern Calculation doesn’t include the value of benefits, which will be required to be included by the SEC’s rules. When you add approximately $20k of benefits onto compensation for the CEO and the median employee, the denominator gets considerably larger. All of this is spelled out in narrative & numerical detail on pages 24 and 25 of the preliminary proxy statement…