The Advisors' Blog

– Broc Romanek

Here are three separate pay ratio items:

1. This summary of a Pearl Meyer report includes these interesting pay ratio stats from a survey:

– Just 13% of the directors surveyed indicate their board has talked about the required disclosure of the ratio for the CD&A.
– Only 11% say they have discussed both internal and external communication.
– Companies in technology and healthcare/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.

2. This Weil Gotshal blog recaps what Corp Fin Chief Counsel David Fredrickson said at our “Pay Ratio” conference last week.

3. Ran into Maslon’s Marty Rosenbaum at our conference – and he reminded me of this humorous fictional pay ratio disclosure that he drafted several years ago:

[Disclaimer: An attempt at Item 402(u)-related humor follows. Because sometimes we just have to laugh.]

Soon a public company will be required to identify its median compensated employee and compare that employee’s compensation to that of the CEO. What if a company took this disclosure to the next level: don’t we want to learn something about the employee? Maybe you could see something like this in a future proxy statement:

“After a careful study utilizing its proprietary statistical sampling analysis, the Company has determined that its median compensated employee (“MCE”) is Ralph Snowden, age 37, pictured below. Since 2008, Mr. Snowdon has served as a senior fry cook at the Company’s West Des Moines, Iowa restaurant. Prior to that time, he held a wide variety of kitchen positions with companies in the fast food industry. As shown in the Summary Median Compensation Table (“SMCT”) below, in 2015, our MCE’s total annual compensation was $37,440. In 2015, the mathematical ratio of the total annual compensation of Ralph Snowden to that of our CEO, Ruth Swenson (the “Ralph to Ruth Ratio”) was one-to-238, or 0.0042016-to-one.”

Wouldn’t that be more fun? But now that I think about it, I’m not sure any part of Item 402(u) will work in Minnesota, where all the employees are above average.