David Outlaw, CEP
Managing Director, Valuation & HR Advisory Services
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The CEO pay ratio disclosure rule brings with it an evolving set of challenges. The rule itself is a mix of general principles and explicit guidance that leaves no shortage of both flexibility and questions. Meanwhile, companies must cope with gathering voluminous HR data, performing the calculation itself, helping stakeholders understand the result, and more. Eventually, attention will turn to how the numbers trend, whether the calculation process is automated and recurring, and what events—internal or external—could cause a surprise down the road.
Equity Methods can calculate your CEO pay ratio and provide supporting information to comply with the SEC’s requirement. We leverage our knowledge of statistics, expertise with data, and exposure to industry-wide practices to try many different approaches toward the calculation. This helps you take more control over the calculation, understand how sensitive it is to inputs, and think about the most effective way to disclose it.
How We Help
We provide all levels of assistance. That could be help with data collection all the way through disclosure review. Or it could be just a ‘sanity check’ of your completed calculation. Either way—or some other way in between—we tailor our approach to your unique needs.
Whether your needs are end-to-end or more targeted, these are some of the ways we support efforts to tell a clean, compelling pay ratio story:
- Develop a robust and compliant methodology to calculate pay ratio for proxy disclosure
- Combine, merge, and test disparate datasets to organize compensation data in a controlled manner
- Apply distributional analysis in cases where data are not accessible to fill in missing data elements
- Document the calculation methodology to assist with proxy preparation
- Offer insights on emerging industry best practices and statistically valid calculation approaches
- Go beyond the required disclosure, and uncover patterns and trends across multiple sources of employee compensation data
- Apply retrospective and forward-looking analytics to show how pay ratio has changed over time
- Perform attribution/sensitivity analyses to reveal the role that calculation assumptions and business characteristics (such as significant outsourcing) play in driving pay ratio
- Collaborate with you to determine whether a supplementary disclosure is appropriate that highlights logical business drivers behind your pay ratio result
Pay Ratio Library
Here’s a resource center for HR, finance, and accounting professionals who want to get on top of Dodd-Frank CEO pay ratio disclosure rules.
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