CEOs: The vast majority of proposals about corporate pay included in this report address disparities that occur for employees based on gender and race. But we also include a few that discuss the vast disparities between pay for CEOs and other employees. The United Steelworkers and Trillium Asset Management have filed the same proposal at 3M and TJX, asking each to

take into consideration the pay grades and/or salary ranges of all classifications of Company employees when setting target amounts for CEO compensation. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or the terms of any existing compensation plan.

The resolution earned 10 percent last year at 3M. It is new at TJX, which is arguing at the SEC that it is moot and also concerned with ordinary business; the SEC has yet to respond.

Jing Zhao, the Chinese human rights activist, also asked Apple to “improve guiding principles of executive compensation,” discussing CEO pay disparity in the body of his proposal. But the company persuaded the SEC that it dealt with ordinary business. Zhao has a different resolution at Juniper Networks, asking it to “reduce the CEO Pay Ratio by 5% each year until it reaches 50:1,” but the company contends at the SEC that it also is ordinary business since it is too prescriptive; the SEC has yet to respond.

Walt Disney successfully argued another proposal, from individual proponent Karen Perricone, also related to ordinary business and was too vague. It asked the company to

limit the annual total compensation of our Chairman and Chief Executive Officer to a ratio not to exceed the total annual compensation of Disney’s median employee by more than 500:1. This proposed ratio would be attained within a five year timeframe by decreasing the annual total compensation of our Chairman and Chief Executive Officer and by increasing the annual total compensation of our lowest paid employees.

WHAT PAY RATIO DISCLOSURE CAN TELL US ABOUT DECENT WORK

ROSANNA LANDIS WEAVER
Program Manager, Power of the Proxy, As You Sow

Under a provision of the 2010 Dodd-Frank financial reform bill, companies must disclose the ratio of the pay between the CEO and the company’s median employee. While shareholders had insight into executive compensation under prior rules, this is the first insight into median employee pay. It should not be skimmed as another number amongst so many in a proxy statement but considered for the insight it may offer into decent work.

Gender and race: Arjuna Capital remains the most prolific of the proponents in this area; the New York City Comptroller’s Office is a key player, too, but its 2020 filings are not yet public. Additional proposals on pay equity are from Proxy Impact on behalf of the Women’s Inclusion Project. All but two of the proposals are resubmissions from 2019, when the average for 15 votes on the issue was 26 percent. High votes last year at companies that have resubmissions were at CIGNA (35.6 percent), Adobe (33.3 percent), JPMorgan Chase (31 percent) and Intel (30.3 percent).

Arjuna wants 13 companies (see table 41) to report on global pay disparities. Last year it asked six companies to report on risks associated with public policy about gender pay gaps generally, and six others about the global median pay gap. This year the latter is the request at all companies and adds race to the mix, seeking a report “on the company’s global median gender/racial pay gap, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent.” The proponents state that “Assessing if a company has pay gaps requires analyzing both equal pay and equal opportunity. This is done using adjusted and unadjusted (median) pay data. The objective of this proposal— median pay gap disclosure—addresses the structural bias affecting the jobs women and minorities hold, when white men hold most higher paying jobs.”

IT’S TIME FOR AN HONEST ACCOUNTING OF PAY EQUITY

NATASHA LAMB
Managing Partner, Arjuna Capital

In December 2019, Starbucks became the second U.S. company to disclose the full story of gender and racial pay equity. The retailer disclosed both its “equal pay” gap and its “median pay” gap for women and minority workers. The headline here is that there was no gap on either basis in the United States—a rarity among companies. In fact, Starbucks’ median pay results stand in sharp contrast to the 20 percent gender pay gap for the U.S. workforce and the 30 percent gap for the retail industry.

The United Kingdom mandates disclosure of adjusted and unadjusted (median) pay data, yet with few exceptions, U.S. companies decline to provide unadjusted data. All of the companies facing resolutions (with one exception) assert that median pay is not a useful metric, although this is the key metric used by the Organization for Economic Cooperation and Development, the World Economic Forum and the United States Department of Labor.

As for racial pay gaps, in general, U.S. companies report on domestic racial breakdowns for the United States and gender differentials only (when they discuss them) globally.

Withdrawals—To date, just one of the Arjuna proposals has been withdrawn, at Starbucks; the company agreed to provide the global median pay gap data requested. Arjuna had withdrawn most of its 2018 proposals that focused only on women, asking for reports on “policies and goals to reduce the gender pay gap.” It reached agreements with major banks that year about actions they planned to take to close their pay gaps but was less successful in 2019 with the global data request. Companies proved reluctant to report on worldwide disparities, which are affected by country-by-country pay differentials. Companies have reported on adjusted data that often leaves out 10 percent to 15 percent of a workforce total, including the highest paid positions where the largest discrepancies appear, which is why proponent are now asking for unadjusted data.

Women: Proxy Impact has three proposals similar to Arjuna’s, but only about women, seeking a report “on the company’s global mean and median gender pay gap, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining female talent.” The proposal is a resubmission at CIGNA, where it earned 35.6 percent last year, the highest 2019 vote on this issue. Proxy Impact withdrew in 2019 at Pfizer when the company said it will hire outside experts to assess in the first half of 2019 whether it has a global gender pay gap and a U.S. race pay gap, and the sources for any gaps, and report publicly on the results by no later than early 2020. Its internal U.S. pay audits have found no gender- or race-based pay gaps, Pfizer said. But Proxy Impact refiled this year, asking just about unadjusted global median pay, since the company has only provided adjusted data so far. The filing is new at Wyndham Destinations.