Tag: Human Capital

This CEO Made 2,900 Times More Than His Employees

The U.S. Securities and Exchange Commission has long required public corporations to disclose the compensation of their top officers. The debate about whether chief executive officers are paid too much has gone on for decades. Many investors object to high CEO pay, which often runs into the tens of millions of dollars. Boards of directors claim that good CEOs are hard to find and that they have responsibilities for tens of thousands or even hundreds of thousands of workers.

Last year, one American CEO made over $200 million, which is 2,963 more than the median compensation of his workers. According to the SEC, “The median employee’s annual total compensation was $71,259 in 2020” at the company he runs. He was also the only CEO to make over $100 million, according to an exclusive analysis of the pay of 294 public company CEOs done by MyLogIQ, which uses artificial intelligence and machine learning to analyze public company data.

This CEO Made 300 Times More Than His Workers

The U.S. Securities and Exchange Commission has long required that public companies post the annual compensation of their top executives in their proxies. In 2015, the SEC ruled that public corporations had to show how much their CEOs made in relationship with the median salary of their firm’s workers. The rule went into effect in 2017. The decision was part of the larger Dodd-Frank Act, which Congress passed as a sweeping reform of the federal’s governments financial regulations.

Using artificial intelligence and machine learning, MyLogIQ provides information about public companies. The firm has provided data exclusively to 24/7 Wall St. that covers CEO pay ratios from 294 public companies that have released their 2020 proxies. CEO compensation included salary, bonuses, stock awards, stock options, long-term incentives, short-term incentives and changes in pension values, all of which are required to be broken out by SEC rules.

The person who had the highest ratio of pay to the median compensation of his company’s employees was Michael F. Roman, the board chair and chief executive officer of 3M. His ratio was an extraordinary 308 to 1. In the 3M proxy, the company reported, “[W]e selected the median employee from among 96,902 full-time, part-time, temporary and seasonal workers who were employed as of December 31, 2020.”

Companies Offer Investors a Glimpse at Employee Turnover

U.S. companies are sharing more details about employee turnover as part of new disclosure requirements. But for some investors, the effort doesn’t go far enough because finance chiefs handpick the information they provide.

Workforce spending is usually the biggest expense for companies, making up on average 57% of total operating costs for S&P 500 companies, according to MyLogIQ, a data provider. Turnover rates, which cover voluntary exits as well as layoffs, often indicate to shareholders how well managed a business is.

U.S. businesses slashed 41 million jobs in 2020, compared with 21.7 million cut the previous year, according to the Bureau of Labor Statistics. It isn’t clear how many of those will come back once the pandemic abates.

‘Next Wave’ of Talent on the Engagement Agenda

Boardrooms are abuzz about human capital. This is largely due to the Covid-19 pandemic’s impact on the workforce, SEC updates to disclosure requirements, and a growing investor consortium prodding companies to get a handle on workforce strategy and related disclosures.

Investors are asking for more details on emergency succession planning, workforce turnover and the talent pipeline as companies work through leadership changes during the crisis. Directors should be prepared to field questions about succession planning during upcoming engagement sessions.

While a number of companies put CEO succession plans on hold this year, data shows, sources say boards need to take a deep dive into the talent pipeline of the entire organization to ensure the right leaders and teams are in place to navigate through future turmoil.

…According to the public company intelligence provier, MyLogIQ, 94% of the S&P 500 disclosed responsibility for succession planning in 2020 proxies, up from 93% in 2019 and 90% in 2018.

What Sets Some Companies Apart in the Current Crisis

As the downturn has affected a growing number of companies, it has become plain that “no one is immune” from letting workers go, in the words of Richard Florida, who teaches economic policy at the University of Toronto.

Yet as our most recent research shows, some companies are better inoculated than others from having to furlough or lay off people—namely, those that are most effectively managed.

Our findings are based on a statistical model that was created by the Drucker Institute and underlies the Management Top 250, an annual ranking produced in partnership with The Wall Street Journal. Rooted in the core principles of the late management scholar Peter Drucker, it assesses a company’s “effectiveness”—defined by Mr. Drucker as “doing the right things well.” The 2019 list was published in November.

In all, we examined 820 large, publicly traded companies last year through the lens of 34 indicators across five categories: customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.

SEC Tracking Covid-19 Disclosures on Human Capital

Boards should expect pressure from investors and regulators to disclose more information on workforce health and safety measures in light of the Covid-19 pandemic, experts say.

Major investors say the current disclosures aren’t detailed enough, and a large group is pressuring the SEC to ramp up disclosure requirements on the effectiveness of companies’ human capital–related measures. The commission appears to be hearing some of those demands as SEC officials say disclosures related to human capital are being integrated into rulemaking.

This comes on the heels of an SEC roundtable with prominent investors, who called for more transparency on remote working costs, protective equipment for employees and specific forward-looking guidance on liquidity plans.

About a Third of Companies Cut Employee Pay in Response to COVID-19, Survey Finds

As bad as the pandemic job losses have been, with around 31 million Americans on unemployment rolls, it could actually have been worse. Some companies have managed to cut their labor costs to save money, without resorting to permanent layoffs — at least so far.

In a recent survey of HR managers, outplacement firm Challenger, Gray & Christmas found that 1 in 3 companies cut employee pay in response to the pandemic.

“Of that group, 55% reported the cuts allowed them to avoid layoffs,” said senior vice president Andy Challenger.

The thinking from these companies, Challenger said, is “we’ll have our team intact, it won’t hurt morale so bad by letting people go.”

Companies Choose Furloughs Over Layoffs to Manage Coronavirus Slowdown

When meat orders from restaurants, hotels and other food-service clients dried up at two of Hormel Foods Corp.’s plants in April, finance chief Jim Sheehan chose to furlough roughly 350 workers, but didn’t lay them off. These furloughed employees didn’t receive pay but got benefits such as health care.

It was a careful calculus. After years of effort to secure talent in a tight labor market, many finance chiefs responding to the shock of the coronavirus pandemic have so far preferred to furlough workers instead of severing ties completely, even if it means spending a little more.

“Our employees are long-term investments for us and they’re a precious resource, so we needed to do what we could,” Mr. Sheehan said.

Other finance chiefs made a similar choice as the coronavirus pandemic shut down businesses across the country. Of the 87 firms in the S&P 500 to announce staff reductions from early March through the end of June, 65 chose to furlough workers, according to an analysis of securities filings by data provider MyLogIQ.