The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

May 3, 2018

Supplemental Pay Ratios: Not So Many (So Far)

Liz Dunshee

One of the big unknowns for the first year of mandatory pay ratio was whether companies would include supplemental ratios using a different methodology from the required rules. What situations would justify that extra effort? This Pearl Meyer blog notes that of the first 1039 companies to file proxies this year, only 99 have included a supplemental ratio. That’s less than 10%. Here’s what else they found:

– Most of the supplemental ratios were significantly lower than the required pay ratio.

– The desire to smooth out the impact of one-time or multi-year grants to a CEO was the most commonly occurring reason to provide a supplemental ratio.

– The most profound decrease from the required ratio occurred when companies provided a supplemental ratio that excluded part-time and seasonal employees.

– 14 companies provided a supplemental ratio that was greater than the required ratio, mostly likely to avoid a drastic increased ratio in 2019.

It’s possible that supplemental ratios will become more common in the future, as companies try to explain year-over-year pay ratio changes…