transcript   Transcript

Preparing for the New CEO Pay Ratio Disclosure -- What You Need to Know

Recorded on: Oct. 26, 2017
Running Time: 01:09:15

Full Transcript:

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Taken from the briefing Preparing for the New CEO Pay Ratio Disclosure -- What You Need to Know recorded October 2017 in New York.

The disclosure of the ratio of the compensation of the CEO to the compensation of the median employee (as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act) will be required for most public companies beginning in 2018. While the SEC adopted rules to implement this requirement in 2015, a deferred implementation date, as well as uncertainties about whether the provision would actually go into effect, has resulted in many companies just beginning to focus on what will be needed to comply with this new disclosure obligation.

As has been widely discussed, the crux of the compliance process is identifying the “median employee.” Given the global nature of many companies, the numerous pay arrangements that may be in place to compensate workers in various countries, and the challenges in collecting, integrating, and analyzing compensation data, the costs and time commitment needed to develop and execute a process to identify the median employee can be significant. While the SEC’s rules allow companies significant flexibility to craft an identification process that best fits their specific facts and circumstances, there are still numerous issues that must be carefully addressed to come up with a process that is reasonable, defensible, and repeatable.

Even then, the challenges are not over. Drafting the required disclosure, explaining the methodology used to identify the median employee and determine his or her annual total compensation, and calibrating the message to the various stakeholders who will be reacting to the resulting pay ratio requires careful planning and execution.

Lecture Topics  [01:09:15]

Listen to Mark A. Borges of Compensia, Inc. and Maia R. Gez of Gibson, Dunn & Crutcher LLP for a discussion of the new CEO pay ratio rule, including the mechanics of identifying the median employee and considerations in drafting the required disclosure, as well as the following additional topics:

  • Determining your employee population, including the treatment of non-U.S. employees and independent contractors;
  • Issues that may arise when selecting an appropriate compensation measure;
  • Considerations in selecting both the date and period to measure for purposes of identifying the median employee;
  • Calculating annual total compensation for the median employee and, occasionally, for the CEO (such as when the company has multiple CEOs in a single year);
  • Drafting the required compensation disclosure and whether (and when) to provide additional voluntary disclosure;
  • Strategies for your presenting your Say on Pay proposal in light of the new “pay for performance” analysis; and
  • The latest guidance from the SEC and the Staff of the SEC’s Division of Corporation Finance on how to identify the median employee.

Presentation Material

  • Complying With the CEO Pay Ratio Disclosure Requirement
    Mark A. Borges, Maia R. Gez
  • Preparing for the New CEO Pay Ratio Disclosure – What You Need to Know
    Mark A. Borges, Maia R. Gez
Mark A. Borges ~ Principal, Compensia, Inc.
Maia Gez ~ Gibson, Dunn & Crutcher LLP
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