A recent blog post on the HLS Corporate Governance Forum from Dan Marcec of Equilar provides some early CEO pay trend data. Data cited in the blog is based on proxy statements filed as of March 18 and represents approximately 40% of the Equilar 500. It’s still early but a trend pointing toward a rising CEO pay ratio is worth watching. If the trend showing an increase in CEO pay ratios pans out, the blog reminds companies that they may be faced with a challenging situation in communicating this to stakeholders:
CEO pay ratio appears to be rising – Equilar’s review of early proxy statement filings shows CEO pay declining but median employee pay also declined and the median employee pay declined at a steeper rate, leading the CEO pay ratio to increase.
All of this adds up to a potentially contentious discourse among companies and their key stakeholders — inclusive of employees, investors, advocacy groups and others. The fact that executive compensation is mostly equity and incentive-based, and any change from 2020 will be felt much further beyond when the award was reported, is difficult to communicate clearly to a wide audience.
Unfortunately, a stark realization that employee pay is dropping and the ratio is rising amidst a time of crippling unemployment would shine a light on the fact that regardless of the reason, CEOs are on a different plane than the average employee. Companies will need to be prepared to address this difficult conversation if this trend persists.
-Lynn Jokela, CompensationStandards.com April 13, 2021