Media, Telco Pay Not Seen Changing With New Compensation Reporting Requirements
That media and telco companies now have to release data publicly about what their median employees make and how that compares with the CEO's pay package likely won't change their compensation approaches for either those at the top or for average workers, experts told us. The numbers could be fodder in ongoing populist movements like gender pay equality and living wage issues, said Deborah Lifshey, a managing director at executive compensation consultancy Pearl Meyer.
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Reporting the ratios, mandated by the Dodd-Frank Act, took effect with publicly traded companies whose fiscal year began on or after Jan. 1, 2017. We analyzed the ratio data as reported in the most-recent proxy statements of 25 major media and telco companies. Another seven -- including Apple, Disney, 21st Century Fox and Viacom -- haven't filed proxy statements with CEO pay ratio data.
Two companies in the media and telco universe, CBS and Discovery, had ratios in excess of 500:1. Discovery said David Zaslav's $42.25 million was 522 times the $80,858 that's the company's median annual total employee compensation. CBS said Les Moonves' $69.33 million was 595 times the $116,654 that was its median annual total employee compensation. T-Mobile and Comcast had ratios of more than 400:1, and AT&T exceeded 300:1.
Another 12 companies -- including Tegna, SiriusXM, Crown Castle and Windstream -- had ratios of less than 100:1. One of the smallest reported ratios at the companies we looked at was EchoStar's 19:1, with it saying Michael Dugan made $1.86 million and the median annual total employee compensation was $97,584.
Google had the median employee making more than the CEO; the company said Larry Page's total annual compensation of $1 was dwarfed by the $197,274 of its median employee total annual compensation.
The disclosures are "all over the map" and not a good basis for doing company-by-company or industry-by-industry comparisons because of variables like company size, use of outsourcing and employee location that go into the numbers, said Jim Barrall, UCLA Law Senior Fellow in Residence-Milken Institute for Business Law and Policy. He said CEO compensation is set by the market, and the reporting of ratios isn't likely to influence boards' compensation decisions. He said reporting rules were an attempt "to name and shame companies and CEOs" and it remains to be seen whether unions use the data in negotiations, organizing campaigns or to support policy arguments in support of minimum and living wages.
The value of the data itself is questionable, some told us. "It is hard to know what the information really means since different companies are calculating the data differently," the Communications Workers of America emailed. Board compensation committees probably won't change CEO pay in light of the new reporting requirements, though they might think about such decisions more in light of activist pressure, Lifshey said. Comparing companies even in the same industry "is somewhat of a fool's errand," given the different methodologies the companies use and their differences operationally, said Harvard Business School business administration assistant professor Ethan Rouen.
Companies like Netflix and Iridium (see here and here) also cautioned against comparing their numbers with those at other companies. Discovery said in its proxy statement its ratio is influenced by the fact about 60 percent of its workforce is outside the U.S., it doesn't annualize its median employees' compensation and they're hired throughout the year.
Rouen said even for starting a national dialogue about pay issues, requiring that companies report average pay differences between men and women doing the same job, or between racial minorities and white employees doing the same job, might have been more valuable since the CEO data doesn't say much new because executive compensation packages have been public record for years. When public companies first disclosed CEO compensation, one big effect was that lower-paid chiefs saw their compensation go up rapidly, Rouen said. That's unlikely to happen though with median pay, since jobs vary.
Wall Street isn't expected to lobby for rescinding the CEO pay ratio reporting requirement. On companies' lists of Dodd-Frank performance priorities, "most companies have bigger fish to fry," Lifshey said, saying rules on pay for performance as required by Dodd-Frank aren't finalized. Agreed Barrall, the reporting requirement is "not a high-enough priority for the Congress to try to get rid of it," especially since companies -- having provided the ratio data once -- will likely find doing so again in the future shouldn't be unduly burdensome. We contacted half a dozen companies in our analysis -- Comcast, Charter, AT&T, Verizon, Dish Network and Frontier Communications -- with questions about the pay ratio's effects on compensation policies; none commented.