Dive Brief:
- When the Securities and Exchange Commission announced its new CEO Pay Ratio rule in 2015, much hand-wringing by affected employers followed, Now, a survey from Mercer has found that CEO-to-median-employee pay ratios are expected to be less than 200:1 at the majority of surveyed companies - much lower than the 300:1 ratios frequently publicized in the post-rule disclosure atmosphere.
- Beginning in 2018, all publicly traded employers will have to disclose the ratio of the CEO’s total pay to the median total pay of all US and non-US employees. While the 2018 effective date may seem a long way off, according to Mercer’s survey of 117 employers across 12 industries, three-quarters of companies have already selected or are considering one or more calculation methods for determining the median employee.
- As might be expected, the Mercer survey shows that business sectors with higher levels of professional staff have lower ratios than industries with more part-time, temporary and less-skilled employees.
Dive Insight:
Of course, CEO pay ratios vary by industry, as the survey revealed the highest ratios exist in the retail/wholesale and consumer goods sectors, while the lowest ones occur in the banking/financial services and technology sectors. HR leaders within the banking/financial services sector are no doubt pleased to know that their CEOs, often criticized for excessive pay, have lower ratios than most other industries.
Mercer's report is yet another reminder that all areas of compliance require advance planning, especially for companies lacking strong payroll/HR systems or those operating in many countries. Industry observers need no introduction to today's compliance headaches, what with continued high-profile legal battles over issues like FLSA overtime rules. Above all else, HR leaders need to get ahead of how this particular disclosure will impact employees. In other words, it's time to get started on how to break the news to the workforce, especially for employers whose CEOs have the highest ratios.