The CEO Pay Ratio: Great Gift Ideas for Every Compensation Practitioner on Your List

Listen. Do you heard that sound on the rooftop? It's the sound of Executive Compensation practitioners trying to escape before they get dragged into the CEO Pay Ratio brain drain.

Don't kid yourself. Anyone who isn't feeling a bit anxious about this isn't thinking real hard. But worrying will only earn you coal in your stocking. Instead, here's three great gifts to give yourself and your colleagues. I promise that, eventually but reliably, they will help you to be more jolly in 2016 than you imagine you could ever be.

1. When you come to a fork in the road, take it. Thanks, Yogi, for your advice on this one. Complaining and resisting is only going to make things worse for you. The ratio is as done a deal as anything else. The government could change their minds, just the way they could all play more nicely together -- it's a great idea but it's not going to happen.

To get yourself started in a thoughtful way, run don't walk to WorldatWork's webinar called, "The CEO Pay Ratio-Understanding the New Rules and Preparing to Comply." (It looks like access ends on Jan. 25, 2016.) The discussion of the pay ratio is mostly unemotional and consistently clear, and the presenters explain how to make the ratio calculation far, far less ominous than you are imagining.

Best of all, Stephen Eliseo, CCP, who is the Director of Executive Compensation for Johnson & Johnson describes what his company has learned by doing dry runs every year beginning 2010 in preparation for pay ratio disclosure. That's right, they have completed five years of experience and boy will their insights be valuable to you. Even if you are expert in the CEO Pay Ratio final rules, there is much to be learned from the implementation ideas that are discussed in the webinar -- especially the emphasis on doing multiple dry runs so you can refine your assumptions, numbers and, frankly, understanding.

2. Learn to take advice. The collaboration needed to pull this off could be more extensive than you have had experience with. This is not just an executive compensation exercise, it's about all forms of compensation. The employee compensation staff will need to help define who the median employee is, and weigh in on how that definition aligns with your compensation philosophy. So, employee compensation is not off the hook here and should be studying up, too.

You'll also need to involve the Compensation Committee, Legal, Payroll, HRIS, possibly obtain pension numbers and more, for all (or most) of your worldwide locations -- not once but often over the period of time that you are tinkering. It's going to take a lot of relationship building with all of them to engender the responsiveness level that will be helpful in your quest.

3. If you think this is just about numbers, you're bound to be embarrassed. Everyone is worried about explaining the pay ratio, but even the WorldatWork webinar doesn't take your communications challenge seriously.

This is my gift to you -- in the same way you need to do multiple dry runs of the numbers, you HAVE TO DO multiple dry runs of the communications starting early in the year, so you have time to try at least three different approaches. Remember it's not just the pay ratio that is going to raise issues. I think that for many employees the "median employee" example will be even touchier. After all, it's a lot more likely that an employee will believe that her/his work is like another employees' than it is like the CEO's, and question why s/he is paid less than the median employee, ineligible for a bonus and so on.

Obviously, it's much too early to offer solutions, but in my next article I'll include some stocking stuffers for the wise and well-behaved among us on how to manage the complicated communication challenges that we are facing.

Wondering what to get for all your favorite CCPs, CECPs, GRPs, ACCPs and MCCPs? You can't go wrong with a copy of the popular ebook, Everything You Do (in Compensation) Is Communication @ www.everythingiscommunication.com. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal at Towers Watson.

Comments

[Dan Walter]

THis is great advice Margaret!

[Margaret O'Hanlon]

Thanks, Dan. As you know, from this vantage point, it's easy to overlook the organization, project management and employee relations that will be involved. It's always easiest to learn from someone's else's experience!

[Kevin]

Great article. Nice Yogi quote also :)

[Margaret O'Hanlon]

Thanks, Kevin. The Yog is one of the loves of my life!