The Advisors' Blog

The Canadians are sorry, but some of them have had enough of excessive CEO pay at US companies. As investors to the north and elsewhere begin to incorporate “fairness” concepts into their say-on-pay guidelines, this blog from NEI Investments – a Canadian investment manager focused on responsible investing – highlights several solutions that are on the table for those concerned about internal pay equity. Here are two excerpts, summarizing a recent roundtable discussion:

– The group acknowledged that integrating language related to pay disparity into voting guidelines is important as a way to determine how appropriate the ultimate amount awarded to executives is.

– Despite some limitations with the median worker pay ratio, participants said it makes an excellent jumping off point for corporate engagement. It can lead to questions such as: How do boards use the ratio to set CEO compensation? Does the company plan to set a target ratio, and how would they go about meeting that target? How do employees feel about pay, given the ratio?

The blog also notes that investors involved in these discussions may be taking a closer look at pay structures for both executives & other employees – including limiting CEO salary increases, reverting to an executive pay structure that is more heavily weighted towards salary, tying vesting of equity awards to worker satisfaction, and applying pressure on companies and the government to raise non-executives’ compensation. The initiatives here appear to be a long-term play, but one worth watching.

– Liz Dunshee