CEO salaries rise even with worker compensation ratio disclosure rule

“For those (companies) that operate in multiple countries, calculating the median employee can be difficult,” wrote Michelle Leder, public company expert and financial journalist, in an article. Bloomberg column in May. “Those who employ a lot of people in relatively low-wage emerging economies, for example, will naturally look worse.” “

It’s a similar argument to that made by global provider Aptiv, with operations in Troy, in its latest proxy filing.

“We believe there are a number of reasons why our pay ratio is not comparable to other companies, including that other companies may have a median employee who works in the United States, may outsource manufacturing, may have different types of workforce, may operate in different countries, or may use different compensation practices,” the filing states. “In addition, in calculating their own compensation ratios, other companies may use methodologies, exclusions, estimates, and assumptions that differ materially from Aptiv’s calculation methodology.”

Overall, the pay-ratio rule has been a “failed experiment,” wrote Leder, who runs Footnoted, a website that tracks SEC filings.

“I don’t say this lightly. I had high hopes for this requirement: just last year I suggested it could further embarrass companies into tackling pay inequality “, wrote Leder. “But as often happens, the reality did not match the good intentions. Many companies, fearful of declaring a ratio too high, manipulated it until it made no sense. is not really comparable between the different types of companies.”

For companies, there are concerns about the optics of having a large median CEO-to-worker ratio, but the rule is largely a way for board members to think broadly about executive compensation, a said Melissa Grim, partner at Honigman LLP and leader. of the Detroit-based law firm’s executive compensation and benefits practice.

Sallie R. Loera