Center Takes Issue with SEC Commissioner Aguilar’s Call for Voluntary Pay Ratio Disclosure

Democratic SEC Commissioner Luis Aguilar released a statement during the week of February 18th calling for companies to make voluntary “robust proxy disclosures” this year by complying with Dodd-Frank and other rules that are yet to be written, including clearly linking pay for performance and disclosing the ratio between CEO compensation and median employee pay.

The Center On Executive Compensation responded with a statement noting that while the Center was “encouraged that the statement recognized the value of supplemental executive compensation disclosures to investors in explaining the pay for performance relationship, [the Center] was disappointed that Commissioner Aguilar encouraged companies to voluntarily disclose a pay ratio in their 2013 proxies.”

Unlike the pay for performance disclosure, there is no evidence that investors are interested in the pay ratio, and companies should not be pushed to spend the time and resources necessary to calculate the unjustifiably complex number.  The ratio is as much a result of the company’s global reach, geographic labor market forces, and the mix of jobs within a company that all reduce the comparability of such disclosures across companies.

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