Issue link: https://digital.shearman.com/i/1035494
Shearman & Sterling LLP CEO Pay Ratio: Perspectives on the First Year and A Look Forward | 11 SEC rules require companies to identify a methodology to determine compensation – a consistently applied compensation measure, or CACM. There was considerable variability Consistently Applied Compensation Measure in the CACMs used by companies. In reviewing CACM disclosures, we analyzed the various components of employee compensation that companies included in their CACM Under SEC guidance, companies had considerable flexibility in how they calculated their pay ratio. As a result, there was a great degree of variability in the components of their calculations and related disclosures. Key issues include: CALCULATING THE RATIO calculation. The frequency with which companies disclosed that their CACM calculation included a particular element of compensation is set forth below: Frequency of Inclusion of Various Compensation Elements of CACM Definition The data is based on 306 S&P 500 companies that disclosed the components of their CACM. This data was provided by Main Data Group, a division of Pearl Meyer. Base salary Annual bonus/incentive Overtime Commissions Allowances Equity grants Retirement/pension benefits Healthcare benefits Other Identifying consistently applied compensation measure (or CACM) Use of statistical sampling Setting a measurement date for determining the median employee Use of adjustments, including cost-of-living adjustments (COLA) Exclusion of employees pursuant to the data privacy exception Exclusion of employees pursuant to the de minimis exception Exclusion of employees of a business that was acquired during the prior year Annualization of the salaries of employees that did not work an entire year Adjusting the median employee's compensation by including items such as health, welfare or retirement benefits or medical, dental, disability and life insurance premiums 205 84 79 18 16 1 16 42 306