Only one in 10 compensation professionals at U.S. corporations believes CEO pay ratio disclosure will provide useful information for investors and companies, according to results of a survey by Towers Watson.
Respondents “are more concerned about the cost and effort likely to be involved in complying” with such disclosure than on how shareholders might react, a statement about the survey results said.
Some 56% of the 375 respondents expressed concern about complying with the disclosure requirement, “with the most common concerns being gathering the pay data, determining their data-sampling approach and identifying the median employee,” the statement said.
But 31% of respondents “said their biggest concern was about where their CEO-to-worker pay ratio stood compared with their peers, the industry or the marketplace.”
The Securities and Exchange Commission proposed a rule Sept. 18 on the disclosure of the median annual total compensation of all employees of a company, excluding the CEO, the annual total compensation of the CEO, and the ratio of the median annual total compensation of all employees to the annual total compensation of the CEO.
“There's a lot of uncertainty about what this will cost,” Todd Lippincott, North America leader of executive compensation at Towers Watson, said in the statement. “In fact, only two in 10 poll respondents agreed that they understand all of the costs, effort and data needed to comply with the new rule.”
The SEC has no time frame for voting on the proposed rule. If the rule is adopted this year, it would become effective for 2015 financial reporting, according to the proposal.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to implement such a disclosure requirement.
Towers Watson on Oct. 1 surveyed mid- and senior-level human resources professionals, specializing in executive compensation and employed by the companies.