Corporate Governance

2018 Corporate Governance & Execution Compensation Survey

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CEO PAY RATIO: PERSPECTIVES ON THE FIRST YEAR AND A LOOK FORWARD Stephen T. Giove, Doreen E. Lilienfeld, Lona Nallengara and Gina H. Lee Labrador, a corporate disclosure documents design firm, assisted with the data collection and analysis Shearman & Sterling LLP 8 | CEO Pay Ratio: Perspectives on the First Year and A Look Forward CEO PAY RATIO: PERSPECTIVES ON THE FIRST YEAR AND A LOOK FORWARD Stephen T. Giove, Doreen E. Lilienfeld, Lona Nallengara and Gina H. Lee As the dust has settled on the first round of CEO pay ratio disclosures, a few things are clear: companies spent considerable time and money calculating and disclosing their pay ratios, many CEOs worried about the response to their pay ratio and, most importantly, the reactions of investors, special interest groups and the press were much more muted than expected. It appeared that the most interested group was the employees, and they were interested in how their own compensation compared to the median As shown below, for the S&P 500 companies surveyed, the median CEO pay ratio was 162:1, the median employee pay was approximately $69,000 and the median CEO compensation was approximately $12.3 million. compensation, rather than to what their companies' pay ratio was. The first round of disclosures did not get us any closer to settling the long-running debate as to whether pay ratio disclosure provides useful information for investors. Some continue to argue it is a tool for special interest groups to raise the drum beat of wage inequality and to wag a finger at perceived corporate greed, while others believe it sheds light on a company's compensation philosophy. A company's pay ratio may become The Pay Ratios 74:1 162:1 107:1 296:1 333:1 395:1 524:1 25 th percentile 75 th percentile 80 th percentile 85 th percentile 90 th percentile 10 th percentile 50 th percentile (median) THE KEY STATISTICS INSIGHTS a more useful data point when it is analyzed over time and compared to industry peers. We reviewed and analyzed the CEO pay ratio disclosures of the 400 companies in the S&P 500 that disclosed their CEO pay ratio on or before July 20, 2018. Information about the CEO pay ratio by industry sector, market capitalization, revenues and number of employees is presented at the end of this insight. Labrador, a corporate disclosure documents design firm, assisted with the data collection and analysis

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