CEO-to-Employee Pay Ratios Lower Than Expected, New Mercer Survey Finds
September 28 2016 - 11:26AM
Business Wire
Mercer’s just-completed CEO Pay Ratio Survey found
CEO-to-median-employee pay ratios are expected to be less than
200:1 at the majority of surveyed companies that have estimated a
ratio. These estimates are lower than the 300:1 ratios frequently
publicized. Not surprisingly, the survey of more than 100 companies
shows that industries with more professional staff have lower
ratios than industries with more part-time, temporary, and
less-skilled employees.
“While the ratio may still seem significant to some, it is not
as high as many might think,” said Gregg Passin, Senior Partner and
North America Leader of Mercer’s Executive Rewards business. “More
importantly, it confirms what we expected – ratios differ by
industry, with the highest ratios in the retail/wholesale and
consumer goods sectors and the lowest ratios in the
banking/financial services and technology sectors. Supporters of
pay ratio disclosure that hope it will pressure companies to reduce
CEO pay may be disappointed to learn that banking/financial
services companies, often criticized for excessive pay, have lower
ratios than most other industries.”
Mercer conducted the survey to gauge companies’ level of
readiness for the SEC’s CEO pay ratio disclosure rule. All public
companies will have to disclose the ratio of the CEO’s total pay to
the median total pay of all US and non-US employees, beginning in
2018. While the 2018 effective date may seem a long way off,
according to Mercer’s survey, three-quarters of companies have
already selected or are considering one or more calculation methods
for determining the median employee.
“Compliance requires advance planning and can be challenging,
particularly for companies lacking robust payroll or HRIS systems
or operating in many countries,” said Mr. Passin. “Companies will
also need to assess the disclosure’s impact on various
stakeholders, especially employees – half of whom will learn that
their pay falls in the bottom half at their company.”
For companies wanting to know how their ratio stacks up against
other companies, key findings from the survey show:
- A majority (60%) of survey respondents
have estimated their ratio, with more than half reporting ratios
under 200:1 and only 20% reporting ratios of more than 400:1.
- Approximately one-third (32%) are
considering statistical sampling as a method to identify the median
employee.
- More than 80% of companies report their
data systems are ready or, with some manual effort, adequate to
identify the median employee.
“Companies that have not yet started to consider methodologies
should not delay. The regulatory flexibility for identifying the
median employee provides both challenges and opportunities that can
take time to explore,” said Mr. Passin.
Mercer’s survey, which was conducted in August, consists of 117
companies across 12 industries, with average revenues of $12
billion. For a summary of the survey results, click here.
About Mercer
Mercer is a global consulting leader in talent, health,
retirement and investments. Mercer helps clients around the world
advance the health, wealth and performance of their most vital
asset – their people. Mercer’s more than 20,000 employees are based
in 43 countries and the firm operates in over 140 countries. Mercer
is a wholly owned subsidiary of Marsh & McLennan Companies
(NYSE:MMC), a global professional services firm offering clients
advice and solutions in the areas of risk, strategy and people.
With 60,000 employees worldwide and annual revenue exceeding $13
billion, Marsh & McLennan Companies is also the parent company
of Marsh, a global leader in insurance broking and risk management;
Guy Carpenter, a leader in providing risk and reinsurance
intermediary services; and Oliver Wyman, a leader in management
consulting. For more information, visit www.mercer.com. Follow
Mercer on Twitter @Mercer.
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version on businesswire.com: http://www.businesswire.com/news/home/20160928006062/en/
MercerStacy Bronstein,
+1-215-982-8025Stacy.Bronstein@mercer.com
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