Friends Fiduciary Encourages More Context for CEO-Worker Pay Ratio Disclosures

May 31st, 2019

Friends Fiduciary joined 47 other investors with assets under management totaling over $3 trillion in signing a letter encouraging companies to supplement their pay ratio data with other information regarding human capital development.

2018 marked the first year where, under Dodd Frank, companies were required to report on the ratio of CEO to median employee pay. CEO pay in the US has ballooned in recent years, far exceeding ratios in Europe and other markets. As investors, and in accordance with the Quaker value of equality, we believe that systemic wealth inequality is bad for business in the long term. Aligning CEO compensation with median worker compensation can also bolster employee perceptions of pay fairness, encouraging productivity.

Although we’re happy to see companies required to disclose their CEO to median worker pay ratio, this figure isn’t as meaningful as it could be. In order to parse pay ratio information, investors need further disclosures that contextualize it, such as identification of the median employee’s job function, breakdown of the workforce by job function, tenure and experience of the workforce, and more.

We believe transparency is an important first step in making our economy more equitable and sustainable, and as socially responsible investors, need more information in order to understand a company’s compensation practices.

Read the letter here.