Jon Weinstein is a Managing Partner and Blaine Martin is Consultant at Pay Governance LLC. This post is based on a Pay Governance publication.
Spring is in the air, and executive compensation consultants are busy reading a cascade of public filings and proxy advisor reports as we analyze and are asked to predict trends in executive pay in 2017 and beyond. One of the most common questions in executive compensation this year concerns what will become of the Dodd-Frank mandated CEO pay ratio set to be disclosed publicly for most companies beginning with proxies filed in 2018—if not delayed or overturned beforehand. Earlier this year, acting Securities and Exchange Commission (SEC) Chair Michael Piwowar took the unusual step of requesting additional comments on the cost and burden of complying with the already approved CEO pay ratio rule, which would require companies to disclose the ratio of CEO pay to that of the median employee. Adding to this uncertainty, the Choice Act 2.0 (currently out of Committee in the House of Representatives) would repeal the CEO pay ratio disclosure requirement if approved by the full House, Senate, and White House. While the future is cloudy regarding the implementation of the Dodd-Frank pay ratio rule in 2018, we note that nine state and city governments have proposed some form of tax code change or local ordinance that would base local income taxation or licensing fees on a public company’s CEO pay ratio.
