Executive Compensation and the Investor, Worker & Stakeholder: The New Corporate Disclosures on CEO Pay Ratios Are Now Part of the Public Dialogue




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
(Monday - May 14, 2018) Source: CNBC - A CNBC analysis of CEO pay ratios suggests that companies with more equal pay distribution also tend to generate higher profit per worker. 

FEATURED AD

Sustainability: Forward Momentum! For Your Attention: The Editors' Scans

Achieving Mission Possible: The sustainability success stories of the week
(Monday - May 14, 2018) Source: edie.net - As part of our Mission Possible campaign, edie brings you this weekly round-up of five of the best sustainability success stories of the week from across the globe. 

Chocolate’s Sustainability Challenge
(Monday - May 14, 2018) Source: New Europe - Today, corporate social responsibility and sustainability are no longer fear-based. Instead, sustainability is viewed simply as a necessity for the future. This is particularly true for industries that depend on agriculture... 

The Future Of Sustainability Rests On The Shoulders Of Manufacturers
(Monday - May 14, 2018) Source: Forbes - Kevin McCloud, a British Designer and TV presenter, is positive that we are on the right track and cusp of greatness thanks to changes in consumer behaviour, new technologies and manufacturing...

The Latest Push for Cities That Are Both More Sustainable and Equitable
(Tuesday - May 15, 2018) Source: Inside Philanthropy - How do we keep “sustainable community” from becoming synonymous with “gentrified community?” That’s a fraught question in major cities…

Accounting for sustainability, the Asian way
(Tuesday - May 15, 2018) Source: Eco-business - Companies in Singapore can now join a new network for their finance departments aimed at incorporating sustainability into business decision-making... 

Investors seek startups that balance health, sustainability and broader supply chain support
(Wednesday - May 16, 2018) Source: Food Navigator USA - Startups that balance the health of consumers and the planet, as well as consider how their product impacts others up and down the supply chain are catching the attention of investors, according to industry insiders. 

#BusinessCase: Employee-Led Sustainability Projects Have Saved Conagra $237M
(Wednesday - May 16, 2018) Source: Sustainable Brands - Conagra Brands, Inc. is once again celebrating its employees’ commitment to sustainability throughout the organization at its annual Sustainable Development Awards. This year, employees entered 57 projects...

Why We Need To Talk About Transparency In Fashion
(Thursday - May 17, 2018) Source: Vogue - ...told the Copenhagen Fashion Summit of the damage the industry, which is the second most polluting industry after the oil industry, has done to our planet. “Accept that and do something. Don’t have a meeting, don’t have... 

Sustainability is dead: Regenerative architecture is the new green
(Thursday - May 17, 2018) Source: Building Design+ Construction - Imagine innovation focused on filling the bucket and striving to achieve what sustainability has done for the world in the last two decades...

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
(Monday - May 21, 2018) Source: The Nation - By leveraging the power of the public purse against corporations that pay their top execs outrageously more than their workers, we could help jump-start a democratic “New Economy.”

Millennial 401(k)s: a peek inside their "socially responsible" investments
(Monday - May 14, 2018) Source: USA Today - Millennials do many things differently from Mom and Dad: They prefer flexible work schedules to the 9-to-5 grind, and they line up dates on their smartphones...

Arctic oil 'undrillable' amid global warming: U.N.'s ex-climate chief
(Tuesday - May 15, 2018) Source: Reuters - An architect of the Paris climate agreement urged governments on Tuesday to halt oil exploration in the Arctic, saying drilling was not economical and warming threatened the environmentally fragile region.

Make room for business ethics
(Tuesday - May 15, 2018) Source: The Sun Daily - The Business Ethics Institute of Malaysia (BEIM) welcomes the reassuring breeze sweeping across the nation.

New study finds variations in global warming trend are caused by oceans
(Thursday - May 17, 2018) Source: Phys.org - New research has shown that natural variations in global mean temperature are always forced by changes in heat release and heat uptake by the oceans, in particular the heat release associated with evaporation.

SPONSORED AD

Headlines for You From the Corporate Sector - Both Positive & Negative 

Smithfield Foods Improves its Brand with a Robust Sustainability Program
(Tuesday - May 15, 2018) Source: Logistic Viewpoints

Philip Morris International Sustainability Report Shows Relentless Business Shift toward Smoke-Free Future
(Tuesday - May 15, 2018) Associated Profiles : Business & Human Rights Resource Centre Source: Yahoo Finance

Federal appeals court orders halt to work on Atlantic Coast Pipeline  
(Wednesday - May 16, 2018) Source: Washington Post

6 states sue maker of OxyContin as they battle expenses, human costs of opioid crisis
(Wednesday - May 16, 2018) Source: USA Today

ConocoPhillips shareholders reject executive pay proposal
(Thursday - May 17, 2018) Source: Reuters

News & Opinion: Asset Managers, Sovereign Wealth Funds, Pension Funds

NY Governor flops in attempt at divesting pension funds from fossil fuels
(Thursday - May 17, 2018) Associated Profiles : New York State Common Retirement Fund  Source: Hot Air - Governor Andrew M. Cuomo today unveiled the 9th proposal of the 2018 State of the State: a plan for divesting the New York State Common Retirement Fund from significant fossil fuel investments...

The Top CSR Issues In Shareholder Proposals
(Wednesday - May 16, 2018) Source: Forbes - Many companies today face large challenges when trying to integrate corporate social responsibility (CSR) practices into their business strategy...

*New Clip* Louis Coppola from G&A Institute Goes In Depth on How to Improve ESG Performance

_________________________________________

G&A Institute Sustainability Update
Informative, insightful, thought provoking
Governance & Accountability Institute's blog focusing on the sustainable world evolving daily before our eyes. Read it, absorb it, question it and challenge.

The “100 Best Corporate Citizens 2018” Roster -– Published by CR Magazine

Are We Making Progress? Considering Recent News About “Apparel Fashion and Sustainability” — and the Investor Initiative to Help Make East Asian Factory Workers Safer and Better Paid…

As the Global Demand for Palm Oil Rises, There is More Focus on the Growing Areas – and on Industry Behaviors Such as Deforestation

_________________________________________

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:

Second in the Series: A BIG YEAR SHAPING UP, 2018 – Developments in Corporate Sustainability / Responsibility & in Sustainable Investing in 1Q

ABOUT THOSE CORPORATE EMPLOYEE PENSION PLANS –The Focus is Increasing on the Shortfalls…and Remedies

_________________________________________
Governance & Accountability Institute Research

Using The GRI Sustainability Reporting Framework Improves The Quality of ESG Disclosures - Joint Research From G&A Institute and Baruch College Shows

Download G&A's
"Sustainability - What Matters"

Research Report
.
Want even more?
Get All 84 Indicator Rankings By Sector.

Learn More About G&A Research

Upcoming Events

_________________________________________

Governance & Accountability
Institute Featured Service
Stakeholder Engagement
Facilitation of engagement, customized research, tools and templates for engaging important stakeholders around ESG Issues…
More on Stakeholder Engagement

________________________________________

G&A WEBINAR SERIES

Missed one of our webinars?
Access archived recordings & slides via the links below. Have an idea for a future webinar, email us at info@ga-institute.com

GRESB in 60 Days: Tech, Tools & Best Practices to Respond in 2017

Why Getting Started with CDP is More Important than Ever in collaboration with CDP

Why 2017 Should Be The Year You Respond to RobecoSAM (DJSI)? in collaboration with RobecoSAM and Nasdaq

G&A Institute Webinar: Moving From G4 to The New GRI Standards

________________________________________

GRI'S USA, UK & IRELAND
DATA PARTNER

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

_________________________________________

Navigating the way to sustainability...
Contents © 2009 - 2018
All Rights Reserved

Copyrights for other providers are noted where appropriate.
Please credit the source if quoted.
_________________________________________

 

The Sustainability Highlights eNewsletter is prepared by Governance & Accountability Institute, Inc. based on continuous monitoring of trends and developments in Sustainability and ESG. Governance & Accountability Instiute is the "Sustainability Headquarters™" for clients in the corporate, investment, public and social sectors. Based in New York, G&A is a for-profit consulting organization providing a range of value-added strategies, services and resources related to ESG & sustainability to clients in the corporate and capital markets communities. For G&A's full range of services, click on each of the links below:

Sustainability / ESG Consulting Services

Communications & Recognition Services

Investor Relation Services

For more information, contact Governance & Accountability Institute, Inc.
New York, New York | Tel 646.430.8230 | Web www.ga-institute.com | Email info@ga-institute.com