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Korn Ferry survey: Retail CEOs worried about upcoming pay disclosure ruling

The upcoming implementation of a new ruling by the Securities and Exchange Commission is causing concern among retail chief executives.

The SEC's new CEO Pay Ratio ruling requires public companies to disclose the ratio of total compensation of CEO to the total compensation of the median employee. According to a survey by Korn Ferry, 64% of retailers are concerned about explaining the meaning of the CEO pay ratio to employees, and 56% are concerned with the comparison of their ratio to that disclosed by other retail companies.

Nearly half (48%) are not going to address the pay ratio disclosure ruling with their employees, the survey found. Only 20% said they would address the issue with employees, and 32% are undecided.

In other findings:

• Three-quarters (76%) 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 from 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."

Korn Ferry recommends 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," said Cory Morrow, senior client partner, executive pay & governance, Korn Ferry Hay Group.
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