It is still too early to draw a conclusion, but the disclosure requirement exposing the disparity between the Chief Executive earnings and the median salary of his/her employees has not created a ripple – at least not yet.
As The Wall Street Journal reported, the difference is enormous, e.g. Wal-Mart discussed their median salary of $19,177.00, and their Chief Executives of $22.2 million in 2017. There were other examples with greater disparity.
Not much noise thus far – but there is a looming risk for CEO's whose company may be an Activist Target.
The study- the University of Warwick Business School in the U.K. study results, their researchers looked at 244 U.S. listed companies, analyzing compensation data over seven years, three years before an Activist showed up – the year it bought stock – and then three years after that. Compared that, with 244 companies not Activist involved , same industry sector, similar size, and book-to-market value.
The conclusion – base pay and stock awards fell drastically. In addition, other benefits and perks took a hit.
The question – will the pay ratio disparity provide data that creates a rational to further negatively impact management compensation once Activists are involved?
Ref: The New York Times, Sunday, May 27, 2018
University of Warwick Business School