Equilar has just released the results of an anonymous survey of public companies, with 356 respondents, which asked these companies to indicate the CEO-employee pay ratios they anticipated reporting in their 2018 proxy statements. As you would expect, there was a lot of variation among companies based on industry, market cap, revenue, workforce size and geography. In addition, because the rule provided significant flexibility in how companies could identify the median employee and in how they calculate his or her total annual compensation, variations in company methodology likely had a significant impact on the results. These variations in the data underscore the soundness of the SEC’s view, expressed at the time it adopted the pay-ratio rule, that the rule was “designed to allow shareholders to better understand and assess a particular [company’s] compensation practices and pay ratio disclosures rather than to facilitate a comparison of this information from one [company] to another”; “the primary benefit” of the pay-ratio disclosure, according to the SEC, was to provide shareholders with a “company-specific metric” that can be used to evaluate CEO compensation within the context of that company.
Thanks to my colleagues Amy Wood, Dani Nazemian and the intrepid Mariane Konstantaras, all three of our Comp & Ben Group, we now have a sighting of pay-ratio disclosure under the new pay-ratio rules, Reg S-K Item 402(u). Apparently, the first example was not in a proxy statement but in a Form S-1 registration statement filed with the SEC yesterday.
Rumor has it that, at the recent ABA Business Law Section Annual Meeting in Chicago, Corp Fin Director Bill Hinman confirmed—in case there was any doubt—that the pay-ratio rule would be in place for reporting in 2018.
What’s next for the House after taking on Dodd-Frank in the Financial CHOICE Act? Apparently, it’s time to revisit SOX. The Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee held a hearing earlier this week entitled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance.” During the hearing, all subcommittee members continued bemoaning the decline in IPOs and in public companies, with the majority of the subcommittee attributing the decline largely to regulatory overload. A number of the witnesses trained their sights on, among other things, the internal control auditor attestation requirement of SOX 404(b). Is auditor attestation, for all but the very largest companies, about to hit the dust?
by Cydney Posner In this article from Bloomberg, institutional investors and proxy advisory firms expressed their views on the value of the SEC’s new pay-ratio disclosure (which, for most companies, will not be reported until the 2018 proxy statement). (See this PubCo post and this Cooley Alert, SEC Adopts Final Pay-Ratio […]