January 7, 2019

More on “Pay Ratio: Letter from Investor Group to Fortune 500”

Recently, I blogged about how Fortune 500 compensation committees have received letters from a group of 48 institutional investors requesting them to disclose more information on workforce compensation practices relative to CEO pay. These letters note that since “disclosure of the median employee’s pay provides a reference point for understanding the company’s workforce,” companies should move “to help investors put this pay information into the context of your company’s overall approach to human capital management” with more expansive disclosure.

Now, the NY Comptroller – which was a signatory to those letters – has announced agreements with five companies to withdraw a shareholder proposal on a related topic. That shareholder proposal urges companies to adopt policies that take into account the compensation of their workforce when setting CEO pay – and the companies’ agreements range from adding “human capital” disclosure, to enhancing workforce benefits, to committing to consider the CEO pay ratio when determining executive pay. For those reading this blog for a while, you know that we have been advocating the use of internal pay ratios as an alternative tool for compensation committees to consider since peer group benchmarking is tainted due to the slippery slope of most companies deciding to pay CEOs in the top quartile for decades…

UK: Pay Ratio & LTIP Disclosures Coming Next Year

As noted in this press release, the UK kicked off mandatory pay ratio and LTIP disclosure obligations for companies yesterday. This Deloitte memo – and Baker McKenzie memo – provide the details. The pay ratio disclosures will be different than those for US-companies. The new requirements apply to companies reporting on financial years starting yesterday or later – so the first actual reporting will be in next year’s disclosures…

Can Footnotes Be “Sexy”?

Recently, I blogged about the value of footnotes. Given the interest in the topic – my poll revealed that 40% always read them; 35% do if they’re in the mood and 20% only if they’re in a SEC release or court opinion – I thought you may find this footnote by SEC Commissioner Rob Jackson in his statement in connection with the SEC’s adoption of the final rules regarding Regulation ATS (Alternative Trading Systems) a few months ago deserving of your attention:

But as millions of ordinary American investors approach retirement, they are increasingly seeking the safety and stability of fixed income. And those markets are still in the dark ages, costing retirees precious savings.[2] Stock markets are sexy, but fixed income will fund ordinary investors’ retirements.[3] It’s time for the Commission to bring common-sense reforms like those we’re finalizing today to the bond markets that millions of Americans will rely upon for the secure retirements they deserve.

[3] I’m using the word “sexy” loosely, but in financial regulation it’s important to remember that all things are relative. Compare Right Said Fred, I’m Too Sexy (Charisma Records, 1991) with John Stuart Mill, On Social Freedom: Or the Necessary Limits of Individual Freedom Arising Out of the Conditions of our Social Life, Oxford and Cambridge Rev. 57-83 (1907) (noting, in connection with the notion that measures of utility are appropriately characterized as marginal, that “[m]en do not desire to be rich, but richer than other men.”) and George Sylvester Viereck, What Life Means to Einstein: An Interview, The Saturday Evening Post (Oct. 26, 1929), at 17 (“Relativity . . . merely denotes that certain physical and mechanical facts, which have been regarded as positive and permanent, are relative with regard to certain other facts.”).

Broc Romanek