Annual reporting is all about building transparency and trust between corporate America and its stakeholders. When the Dodd-Frank Act rolled out in 2010, one piece of legislation that concerned executives was the idea that companies would have to juxtapose the very high CEO pay to the salary of its median employees. Last year was the first year of reporting on the pay ratio rule. The monster under the bed, it seems, wasn’t more than childish fear.
“Despite apprehensions… disclosing the ratio went relatively smoothly for most companies in 2018,” according to a report by consulting firm Mercer. The report looks at the fallout from last year, the implications of the rule, how most companies measured median pay and what companies should do to prepare to keep the spotlight away in 2019.
Most companies defined their own consistently applied compensation measure to identify the median-paid employee:
- 63 percent of companies used a customized metric, consisting of base pay or base pay combined with other pay elements; of these, about one-third included equity compensation in determining median pay.
- 28 percent of companies used tax records.
- 9 percent used the summary compensation table definition