Korn Ferry

Korn Ferry Survey: Retailers Have Concerns Over Upcoming Rule Requiring Their Companies to Disclose Ratio of CEO Pay to Median Employee Salary

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-- Nearly Two-Thirds Are Worried about Explaining Pay Ratio to Employees –

-- Comparison of their Companies’ Pay Ratio to Other Retailers Top Concern --

LOS ANGELES, Nov. 20, 2017 – Retailers have several concerns regarding the upcoming implementation of the Security and Exchange Commission’s (SEC’s) CEO Pay Ratio disclosure ruling, according to a new survey by Korn Ferry (NYSE: KFY). The survey of retail leaders finds the majority of respondents worry about how their CEO pay ratio will compare with other retailers and other industries.

The SEC ruling requires public companies to disclose the ratio of total compensation of their Chief Executive Officer (CEO) to the total compensation of the median employee. Data will first have to be compiled for fiscal year 2017.

Key Survey Findings

  • Fifty-six percent are concerned with the comparison of their ratio to that disclosed by other retail companies.
  • Sixty-four percent of retailers are concerned about explaining the meaning of the CEO pay ratio to employees.
  • Nearly half (48 percent) are not going to address the pay ratio disclosure ruling with their employees. Only 20 percent said they would address the issue with employees, and 32 percent are undecided.
  • Three quarters (76 percent) responded that their median employee will be part-time for the purposes of the ratio calculation.
  • The median income reported by the retailers for part-time employees was $12,000 to $14,000.
  • Retailers reported anticipated pay ratios of 100 to more than 2000. The majority of respondents reported their CEO ratio is likely to between 200 and 1100 of the median employee total compensation.
  • Seventy percent will use W-2 earnings as the “consistently applied compensation measure” to determine the median employee.

“Retailers are concerned that their pay ratio is likely to be higher than other industries because of the significant use of entry-level, part-time employees,” said Craig Rowley, Korn Ferry Senior Client Partner, Consumer and Retail. “Other industries that predominantly use full-time employees are expected to have CEO pay ratios in the 100 to 600 range,” added Rowley.

“It’s not surprising that retail organizations are worried about the internal and external optics of their CEO pay ratio,” said Cory Morrow, Senior Client Partner, Executive Pay & Governance, Korn Ferry Hay Group. “However, we’d recommend that retail organizations not hide the ratio from their employees. Instead, we recommend putting forward clear communication on how the ratio is calculated and why it is not a clear measure of compensation in the organization.”

About the Study

Leaders from 50 retailers with a median revenue of $6.4 billion participated in the September 2017 survey.

About Korn Ferry

Korn Ferry is the preeminent global people and organizational advisory firm. We help leaders, organizations, and societies succeed by releasing the full power and potential of people. Our more than 7,000 colleagues deliver services through our Executive Search, Hay Group and Futurestep divisions.

 

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