Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission developed regulations requiring public companies to report the ratio of CEO pay to median employee pay. The regulations were adopted in 2015, and most companies will be required to report their pay ratio for the first time beginning in the spring of 2018.
While the SEC pay ratio rule was meant to expose excessive executive compensation and give shareholders a way to assess pay disparities, it is a flawed measure that unfairly singles out industries like retail that have high percentages of part-time, seasonal and entry-level employees.
Why it matters to retailers
NRF believes the retail industry’s high reliance on part-time and seasonal workers will distort retailers’ pay ratios.
The SEC’s guidelines require that pay be computed and reported for all employees on an annualized basis rather than for the hourly rate they are paid, even when employees work on a part-time basis. For retail, the median wage will appear artificially low because the industry employs nearly twice as many short-term, seasonal, part-time and young workers as other industries. Retail’s high percentage of entry level workers will also skew the numbers. These factors will contribute to making the CEO-to-worker pay ratios appear artificially high.
NRF advocates for a fair pay ratio rule
NRF conducted research that shows the SEC methodology is seriously flawed. Failing to adjust for the large number of part-time and seasonal workers…