By Vanessa Fuhrmans
Companies frequently say employees are their most valuable
asset, yet many don't divulge where those workers live and
work.
Now, thanks to a new regulatory mandate affecting publicly
traded companies, big multinationals are revealing fresh details
about how many people they employ in the U.S. and to what extent
some of the most recognizable American brands rely on workers in
lower-cost countries.
Kellogg Co., the maker of Frosted Flakes and Pop-Tarts, employs
nearly 20,000 people, or 59% of its workforce, overseas. At fruit
and vegetable producer Fresh Del Monte Produce Inc., 80% of workers
live and work in Costa Rica, Guatemala, Kenya and the
Philippines.
In manufacturing, Whirlpool Corp., known for its home
appliances, recently reported that its median worker in 2017 was a
full-time employee in Brazil who earned $19,906. Boiler maker A.O.
Smith said its median employee last year was an hourly factory
worker in Nanjing, China, who made $17,687.
The new data on median incomes stems from a quirk in the way the
Securities and Exchange Commission crafted the rules for a required
employee-pay disclosure that went into effect this year.
Publicly traded U.S. companies have to disclose the gap between
what they pay the chief executive and what they pay their median
worker, and the ratio between the two. The requirement was mandated
by the Dodd-Frank Act of 2010 in the aftermath of the global
financial crisis as a way to help investors better assess
executive-pay practices.
Past securities regulations have only required that publicly
traded U.S. companies report their overall global head count. In
recent years, roughly 25% went further and voluntarily disclosed
how many employees they had in the U.S. versus abroad, according to
researchers at Ohio State University and the University of
Toronto.
The current requirement is that companies disclose pay for the
CEO and the median worker, but not necessarily the size of their
domestic and overseas workforces. Companies, however, must report
these head counts if they opt to exclude some of their overseas
workers -- up to 5% of the total workforce -- from their
calculations of median workers' pay.
"It's another beneficial outcome of the pay-ratio disclosure,"
said Jonas Kron, senior vice president at Trillium Asset
Management, part of a coalition of institutional investors that
last year petitioned the SEC to require companies to disclose more
employee metrics, such as turnover rates and workforce
demographics. "It's more insight into how companies deal with their
human capital, and that's material information for investors."
Of a sampling of more than 180 S&P 500 companies disclosing
CEO pay ratios so far, about a third have opted to disclose the
proportion of their workforce that is outside the U.S. In total,
286 companies in the S&P 500 have disclosed pay-ratio data so
far.
Some companies, such as Fresh Del Monte Produce, say they are
providing details on U.S. versus overseas workers in part to
explain why their median paychecks are lower than at competitors
whose employees are mostly U.S.-based.
Apparel company Hanesbrands Inc., whose global workforce has
increased by 21% since 2010, already discloses in its annual report
how many of its workers are based in the U.S., where head count has
shrunk. Its proportion of overseas workers rose last year to 88% of
67,200 employees overall, compared with 85% of 55,500 workers in
2010.
In March, Hanesbrands disclosed that CEO Gerald W. Evans Jr.
made $9.58 million, or 1,830 times the $5,237 annual pay of its
median employee. The company said its typical worker was an
equipment operator at a supply-chain facility in Honduras. Four of
five employees work at similar sites, mostly in Central America,
the Caribbean and Asia, Hanesbrands said.
Spokesman Matt Hall said the company provided the extra detail
because it is one of the few U.S. publicly traded apparel companies
to own a majority of its international supply chain instead of
outsourcing the garment work to third parties -- which means many
company employees live in lower-cost countries.
"We wanted to give some context as to how the pay ratio would be
calculated," he said.
The size of overseas workforces is a hot-button issue for many
U.S. companies due to political sensitivities around offshoring
American jobs to developing countries.
Between 2000 and 2015, the most recent year that Commerce
Department data is available, American multinationals hired 4.3
million people in the U.S. but added even more jobs -- 6.2 million
-- overseas. In total, U.S. multinationals in 2015 employed 28.3
million people domestically and 14.1 million abroad.
A number of companies don't disclose their U.S. head counts. One
is International Business Machines Corp., which stopped reporting
the size of its U.S. workforce in 2010 and didn't shed any more
light on the geographic makeup of its workforce when it disclosed
its CEO-pay ratio earlier this year. Chief Executive Ginni Rometty
earned $18.6 million, or 341 times the $54,491 that IBM's median
employee earned.
Some companies reporting their overseas head counts say the
expansion of their workforce abroad isn't about shipping jobs to
low-cost countries, but rather about employing workers closer to
customers.
Kellogg reported that CEO Steven Cahillane, who took the helm in
the fall, made $7.3 million on an annualized basis, or 183 times
the $40,163 pay of its median worker. The company didn't disclose
where that worker was located.
More than half of Kellogg's employee base is outside the U.S.
because it sells food in more than 180 countries, spokeswoman Kris
Charles said. A majority of Kellogg's sales still come from the
U.S., according to earnings reports, but as cereal sales in its
home market have slumped in recent years, it has shed hundreds of
American jobs..
--Theo Francis contributed to this article.
Write to Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com
(END) Dow Jones Newswires
April 11, 2018 08:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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