It’s a cliché but you can’t compare apples to oranges, and it applies to the pay ratio rule. One company and its employees have their distinct structure; thus, you can’t and shouldn’t compare one business pay ratio to another business, even if both are in the same industry.
What changed with the adoption of Dodd-Frank? Even before the Act, regulations required the disclosure of CEOs’ annual compensation. The major change for companies now is that they must disclose data that reveals the pay gap between workers and the CEO. Businesses must perform meticulous calculations to arrive at the median annual pay of all employees – and reveal the ratio between the two figures.
Determining which employees to include in the formula is a complex process. Once companies obtain the data, they advance to the reporting phase. It’s important to note that certain reporting companies are exempt from the disclosure obligation, including those that qualify as a smaller reporting company, emerging growth company, or foreign private issuer.
It is incumbent on businesses to be able to prepare, publish, and defend the ratio. Read the article to find out how to track and disclose your ratio