July 13, 2017
Early CEO Pay Ratio Disclosures – Part 2
As I promised on Tuesday, for today’s blog entry I have highlights from a few more CEO pay ratio disclosures (for the first installment in this series, see “Early CEO Pay Ratio Disclosures – Part 1“).
I’ve linked each company’s name to its relevant proxy statement; you can find the disclosures easily by searching on the phrase “pay ratio” in the proxies.
Northwestern Corp’s CEO pay ratio is 22 to 1, which they acknowledge is up from 19 to 1 the year before. Northwestern has been voluntarily disclosing their CEO pay ratio since 2010 (i.e., since Dodd-Frank was adopted), stating that they are committed to internal pay equity. Over that time period, the CEO’s pay has ranged from 18 to 24 times the median employee pay. Although they calculated the ratio in compliance with the SEC requirements this year, at least for the first few years that they made the disclosure their methodology for calculating the ratio probably varied from the SEC’s requirements, since the SEC’s proposed rules weren’t issued until 2013.
Northwestern provides electricity and natural gas in Montana, South Dakota and Nebraska and has a little over 1,500 employees. The disclosure includes a tabular presentation comparing the CEO’s pay to the median employee’s pay by component of pay (base salary, equity awards, non-equity incentive compensation, change in pension value and NQDC earnings, and all other compensation). The CEO’s total compensation was approximately $2.8 million and the median employee’s compensation was just over $124,000.
Northwestern’s disclosure notes that they used total cash compensation to identify the median employee. They further note that they believe this is appropriate because they don’t grant equity broadly and only 7% of their employees receive annual equity awards (how disappointing). Interestingly, they did not annualize compensation paid to employees who worked only part of the year.
Range Resources has the highest ratio (77 to 1) and the shortest disclosure of the four that I’ve highlighted in this series of blog entries. Their disclosure is so short I can reproduce it for you in full:
As a result of the recently adopted rules under the Dodd-Frank Act, beginning with our 2018 proxy statement, the SEC will require disclosure of the CEO to median employee pay ratio.
Mr. Ventura had 2016 annual total compensation of $9,862,925 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 2016 was $127,938. As a result, we estimate that Mr. Ventura’s 2016 annual total compensation was approximately 77 times that of our median employee.
Although I suspect that 77:1 is lower than many of the ratios we’ll see once all public companies are making this disclosure, but perhaps given its steepness, they felt that no good could come of belaboring the point. Best to be quick about it and move on.
Range Resources is a natural gas, gas liquids, and oil company and they have close to 800 employees.
Annotated Sample CEO Pay Ratio Disclosures
If you are involved with calculating your company’s CEO pay ratio, don’t miss the Pay Ratio & Proxy Disclosure Conference, which will be held on October 17 in advance of the NASPP Conference. Everyone who registers for this program can also attend three pre-event webcasts on preparing for the disclosure and will receive annotated sample disclosures in PDF and Word. Don’t wait to register—the first webcast is scheduled for July 20 and the early-bird rate is only available through July 28.
– Barbara