In August, the Securities and Exchange Commission voted to adopt the rule for the CEO compensation pay ratio disclosure, which will require listing companies to disclose the pay ratio of their CEO to the median compensation of its employees. A vice president at WorldatWork, the premier association for compensation professionals, believes that “the CEO pay-ratio reporting regulation is rulemaking intended to name and shame American business executives.”
Are there examples of executives who have unjustifiably high compensation opportunities at their organization? Absolutely. But that’s not what I want to talk here.
I have the pleasure of working at an organization that serves clients of all sizes—from two-person startup firms to multimillion-dollar global enterprises. Most are based in Indiana, but many serve clients and customers across the U.S. and beyond. Their reach and impact is significant and far-reaching, and it takes tremendous leadership and commitment to run these organizations. The storyline that often gets missed in the headlines is one that has kept me in the compensation field for more than 15 years.
Of the client files on my desktop, almost half of them have executive leaders who—in my very informed opinion—do not pay themselves enough in relation to the market, other employees, and the very demanding job they are committed to 24 hours a day, seven days a week. Here are some examples of why this seems to be happening:
■ One CEO, less than five years short of his announced retirement date, re-allocated a tremendous amount of funds to invest in employee incentive plans, life and disability insurance, wellness programs, and other rewards and recognition programs. These actions have elevated his company to be a Best Places to Work in Indiana three years in a row and helped it increase sales by over 20 percent since 2013.
■ Many are in a “second career” where they took a huge pay cut to lead a nonprofit organization or lead an organization with a mission and vision that they connect with in a meaningful way.
■ One CEO of a large employer in town shares 10 percent of profits each year with top performers in the organization—huge dollars that can sometimes equal a significant percent of a low-earner’s annual compensation. A few CEOs I know pay themselves less than some critical employees within the organization.
I think it is important to pay attention to the myriad examples of excessive generosity, selflessness, and tremendous investment executives make in our community.
That is my say on executive pay.
Compensation adviser at FirstPerson