Companies Concerned About CEO Pay Ratio Disclosures

October 10, 2013 ( – The Securities and Exchange Commission (SEC) proposed a rule requiring public companies to disclose the ratio of their CEO compensation to the median compensation of all other employees, as required by the Dodd-Frank Act.

The majority of U.S. public companies are concerned about the cost and effort of compliance, not shareholder reactions, according to a poll from Towers Watson. Only one in 10 employers expect this disclosure will provide valuable information for investors and companies, Towers Watson found.

Fifty-six percent of poll respondents said they are most concerned about the process of complying with the new disclosure requirement, especially collecting the pay data, deciding how to approach data-sampling and determining the median employee. Only one-third of respondents (34%) said they are comfortable they will have the information necessary to comply by 2015.

“Determining the best approach to identifying the median employee and calculating a pay ratio will be no easy task, especially for large global companies,” said Todd Lippincott, North America leader of executive compensation at Towers Watson. “In fact, only two in 10 poll respondents agreed that they understand all of the costs, effort and data needed to comply with the new rule.”

Others worry about how their CEO pay ratio will compare with their peers’, the industry’s or the marketplace’s (31%); and one-fifth (21%) said explaining the process of determining the ratio to their shareholders is their biggest concern.

Towers Watson polled 375 corporate executives and compensation professionals regarding the ruling during a national webcast October 1. The SEC will accept public comments on the proposed rule until December 2.