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Executive Compensation and the Investor, Worker & Stakeholder: The New Corporate Disclosures on CEO Pay Ratios Are Now Part of the Public Dialogue There are some interesting new angles to the perennial public dialogues that go on about issues related to executive compensation. The new news is regarding the compensation packages for the Top Man (in the Fortune 500 universe, there are only 24 companies that have female CEOs) and the relationship of that sum to (1) the employees of the firm and (2) the shareholders, including key fiduciaries managing OPM (other peoples’ money). The CEO Pay Ratio disclosures of 2018 are now becoming more of a public dialogue. One thread of conversation that is gaining some momentum in the public square is about the ratio of the CEO’s pay to the median worker pay at various companies in specific sectors. This disclosure was mandated in 2010 with passage of the Dodd-Frank reform legislation and it took until this year before the final rules were in effect for public company disclosure, and the disclosures began. The analysis of what this all might mean to investors and stakeholders is now underway. The CNBC commentator James Thorne, for example, explored the ratio issues in a post on May 13th. He begins his commentary by noting that for decades, as publicly-traded companies disclosed their CEO’s pay, criticism could rise when investors thought the pay was not justified by the company’s performance. Now that the CEO-to-Median employee disclosures are being made, Thorne’s initial conclusion was that companies with certain characteristics -- closer CEO pay to workers in the ratio -- may generate a higher profit-per-worker than firms with a wider gap. He began his research with the question: does the ratio say something about performance? The CNBC analysis suggested that it did -- with equal pay distribution generating higher profit per worker. In examining corporate disclosure on the pay ratio to date, the “bunching up” seems to be in the 200-300-400 (200-to-one, etc.) range, with some firms having ratios as high as 800 to 1,000 CEO pay to the median. The analysis was performed by Calcbench. The CNBC commentary explains that ratios can vary, depending on factors like company size, geographic distribution and percentage of part-time or seasonal workers; companies also have latitude in deciding how the ratio is calculated (and then disclosed). The Willis Towers Watson firm noted that direct (company-to-company) comparisons can be difficult. The SEC cautioned that firm-to-firm comparisons were not the intent of the disclosure rule. Touching on something relevant to the investment side is Ric Marshall, MSCI’s executive director of ESG research: “The investors who will find the most value [in ratio disclosures] are those who have concerns about inequality.” Here at G&A we are seeing a steady flow now of news and commentary on the ratio issue from investors and other stakeholders focused on inequality and related societal issues. With fundamental changes in the structure and definition of “worker” the short- and longer-term effects of these changes are being examined by a host of social scientists and pundits. (The familiar “rank and file” has been replaced by part-timers, seasonal workers, contractors, consultants, outsourced workers, and more variations at many firms. Researchers are closely examining the results). One extension of this ongoing public discussion is the concept floated for a minimum payment to those displaced or unable to find work in the new normal of “employment.” We suggest that you check out the flow of related commentary on the topic of “the workplace” from the McKinsey & Company’s Global Institute at: https://www.mckinsey.com/mgi/overview The Top Story this week from CNBC explores the CEO pay ratio dialogue and provides highlights within industries for you (manufacturing, retail trade, etc.). The overall public dialogue on “inequality” (steadily rising in tempo and fervor) includes the subset of executive compensation and the CEO pay ratio is becoming a part of the discussion. The news, commentary and research results to come in the months ahead will be of interest to investors, employees and other stakeholders. Top Stories Companies with closer CEO pay ratios may generate higher profit per worker
Sustainability: Forward Momentum! For Your Attention: The Editors' Scans Achieving Mission Possible: The sustainability success stories of the week Chocolate’s Sustainability Challenge The Future Of Sustainability Rests On The Shoulders Of Manufacturers The Latest Push for Cities That Are Both More Sustainable and Equitable Accounting for sustainability, the Asian way Investors seek startups that balance health, sustainability and broader supply chain support #BusinessCase: Employee-Led Sustainability Projects Have Saved Conagra $237M Why We Need To Talk About Transparency In Fashion Our Focus This Week on A Range of ESG Topics & Issues – More Things For You to Think About How to Get Rid of the Super-Rich Arctic oil 'undrillable' amid global warming: U.N.'s ex-climate chief Make room for business ethics New study finds variations in global warming trend are caused by oceans
Headlines for You From the Corporate Sector - Both Positive & Negative Smithfield Foods Improves its Brand with a Robust Sustainability Program Philip Morris International Sustainability Report Shows Relentless Business Shift toward Smoke-Free Future Federal appeals court orders halt to work on Atlantic Coast Pipeline 6 states sue maker of OxyContin as they battle expenses, human costs of opioid crisis ConocoPhillips shareholders reject executive pay proposal News & Opinion: Asset Managers, Sovereign Wealth Funds, Pension Funds NY Governor flops in attempt at divesting pension funds from fossil fuels The Top CSR Issues In Shareholder Proposals
| *New Clip* Louis Coppola from G&A Institute Goes In Depth on How to Improve ESG Performance
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G&A Institute Sustainability Update™ The “100 Best Corporate Citizens 2018” Roster -– Published by CR Magazine _________________________________________
G&A's To The Point! is a businesss intelligence web-platform resource. This management briefing service offers timely insights and perspectives on Corporate Sustainability, Responsibility & Citizenship.Click here to request a trial subscription. Below are links to a sampling of three recent briefs: ABOUT THOSE CORPORATE EMPLOYEE PENSION PLANS –The Focus is Increasing on the Shortfalls…and Remedies _________________________________________ FLASH REPORT: 85% of S&P 500 Index® Companies Publish Sustainability Reports in 2017
Using The GRI Sustainability Reporting Framework Improves The Quality of ESG Disclosures - Joint Research From G&A Institute and Baruch College Shows
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G&A Institute is the Data Partner for the Global Reporting Initiative's (GRI) in the USA, UK and Republic of Ireland. We identify, receive, collect, analyze, database, and communicate about every report issued in any of the 3 countries. Over the past 6+ years, G&A analyzed 6,000-plus sustainability reports in this pro bono role and databased 100+ important data points for each report. Find out more @ G&A's What's A Data Partner _________________________________________
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