The bigger the wheels, the more slowly they turn, and seldom will you find wheels bigger than those inside the U.S. government. The wheels within one particular agency, the Securities and Exchange Commission (SEC), have been churning for no fewer than 5 years, trying to shape policy to address provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as Dodd-Frank. Among those provisions were executive pay ratio disclosures.
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We spoke with Robin A. Ferracone, chief executive officer of Farient Advisors, an independent executive and performance compensation consultancy. Ferracone is an expert in helping companies execute their executive compensation policies. Her firm, Farient Advisors, recently released its take on SEC’s pay ratio disclosure rule, offering insight and advice about how to implement it.
The pay ratio provisions of Dodd-Frank sought to inform investors about the ratio of pay between the company’s CEO and its median-paid employee. On the surface, that might seem like a valuable piece of information for investors who are considering exercising their Say on Pay rights relative to executive compensation.
However, Ferracone does not believe that the ratio will provide much value for investors.