The Securities and Exchange Commission has adopted a new protocol mandated by the Dodd-Frank financial law that will require large companies to disclose their median compensation level starting in 2018.
The law was established for the benefit of company shareholders as they will be presented with more information pertaining to how executives are paid. While this law will undoubtedly benefit shareholders it may also come with some unintended backlash.
Steven Seelig, a senior adviser for executive compensation consultancy firm Towers Watson, estimates that the current pay from CEO to median is 300-to-1. He said:
“For any company out there, this number’s going to be huge.”
Another managing director, Deborah Lifshey from Pearl Meyer, said that employees are going to respond when they figure out how they size up against their peers and rivals. She said:
“They’re not really concerned about what the pay ratio actually is. They’re more concerned about what will happen, how the media will react, what it will do with this data.”
While some of this information is currently available on websites that collect pay data from anonymous employees like Glassdoor and PayScale, all corporate annual reports will have to disclose median worker pay to the public starting in 2018. Roger Brossy, managing director of Semler Brossy said:
“The unintended consequence could be things like companies recognizing that they actually have a more expensive labor force than somebody else and looking to push jobs offshore to cheaper labor markets.”
After analyzing thousands of voluntary and anonymous salary reports, Glassdoor compiled the data into a table to show the ratio of CEO pay to media worker pay at S&P 500 companies in 2014.