The Advisors' Blog

This Glass Lewis blog highlights a potential use case for CEO pay ratio disclosure—to gauge a company’s human capital management practices. Since it allows companies to use various methodologies to identify the median employee, the rule’s flexibility has resulted in limited comparability of the data across companies, but Glass Lewis has identified helpful takeaways by considering year-over-year changes. As an example, the blog cites one company whose NEO base salaries increased by 50%—for which the company cited a challenging recruiting environment and inflationary pressures—while compensation for rank-and-file employees, which was evident in the pay ratio disclosure, only increased 6%.

This is a good reminder that CEO pay ratio can’t be a fill-in-the-blanks exercise every year, even though it has largely failed to be the controversial, headline grabbing disclosure some expected years ago. Think about how your numbers have changed year-over-year and how investors will react to this year’s data. If there are any anomalies or surprises, make sure to address them with contextual disclosure.

– Meredith Ervine