Will Pay Ratio Disclosures Tell Investors What They Want to Know?

Will Pay Ratio Disclosures Tell Investors What They Want to Know?

Public companies in the US recently began publishing the ratios between the pay of their CEO and that of their median employee in compliance with a regulation adopted by the Securities and Exchange Commission in 2015 that went into effect in the 2017 fiscal year. The regulation, prescribed by the 2010 Dodd-Frank financial reform legislation, had been a potential target for revision, or reversal by the Trump administration, but major institutional investors, particularly activist funds, pressured the SEC not to delay or discard the rule.

As the due date for disclosure approached, executives expressed anxiety about how to communicate these figures to their employees, as well as how the media and shareholders would react. With regard to employees, the concern was not so much that they would learn their CEO was earning an outrageously large salary, but more that half of them were about to learn that they earned less than the median employee and would want to know why.

So far, over 500 companies have published their disclosures, and according to an analysis last month by ISS Analytics, “the numbers have landed all over the map,” from 1.87 for Berkshire Hathaway CEO Warren Buffett, to 2,526 for Aptiv PLC’s Kevin Clark (the median ratio for S&P 500 companies was 166:1). The SEC rule requires companies to compare salary alone, so the ratios don’t account for what CEOs earn from capital gains and dividends.

Because of this limitation, David McCann recently commented at CFO, the rule isn’t as helpful to investors as it’s supposed to be, as it allows some companies to massively undercount how much money their CEOs really make. McCann points to the examples of the private equity firms Apollo Global Management, which reported that its CEO Leon Black was paid $250,888 last year, and Carlyle Group, whose founding co-CEOs David Rubenstein, William Conway, and Daniel D’Aniello each earned $281,315. These numbers are only slightly higher than the pay of the hedge funds’ median employees, but, McCann argues, they are also meaningless:

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CIPD ‘Working Lives’ Survey Points to Overwork, Wellbeing As Key Challenges for UK Workforce

CIPD ‘Working Lives’ Survey Points to Overwork, Wellbeing As Key Challenges for UK Workforce

The UK Working Lives report, billed by the CIPD as its first comprehensive survey of the British workforce based on its new Job Quality Index, was released on Wednesday. Surveying around 6,000 workers throughout the country, the report aims to produce a clearer and more objective picture of the quality of the jobs available to employees in the UK, “using seven critical dimensions which employees, employers and policy makers can measure and focus on to raise job quality and improve working lives”:

The health and value of the modern economy has long been gauged purely on quantitative measures such as gross domestic product, growth rates and productivity. A concerted focus on advancing the qualitative aspects of jobs and working lives will prove to be the next step forward.

Overall, the picture the report paints of the British workplace is positive for a majority of employees: Most said they were satisfied with their jobs, while 80 percent said they had good relationship with their managers and 91 percent said they had good relationships with their colleagues. Nearly 60 percent said they would choose to work even if they didn’t have to. Nonetheless, substantial numbers of respondents identified overwork, stress, and mental health concerns related to their jobs, pointing to shortcomings in the impact work is having on their quality of life.

Three in ten workers told the CIPD they suffered to some extent from “unmanageable” workloads, while 6 percent said they were regularly swamped with “far too much” work each day. While 30 percent reported feeling “full of energy” at work most of the time, 22 percent said they often felt “under excessive pressure,” another 22 percent said they felt “exhausted,” and 11 percent reported feeling “miserable.” And although 44 percent said work had a positive impact on their mental health overall, a full 25 percent said the opposite. In terms of their physical health, only 33 percent said they thought work had a positive impact versus 27 percent who said its effect was negative.

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Medical Marijuana Is a Mainstream Issue, Including for Employers

Medical Marijuana Is a Mainstream Issue, Including for Employers

Wednesday morning, the Internet was abuzz with the news that former House Speaker John Boehner had joined the advisory board of Acreage Holdings, a company that grows, processes, and distributes cannabis in states where the drug has been legalized, as had former Massachusetts Governor Bill Weld. The two former politicians, both Republicans, claim never to have tried the drug themselves, but Weld, who was the Libertarian Party candidate for vice president in 2016, has advocated legalizing medical marijuana since the early 1990s. Boehner, by contrast, once said during his time in the House that he was “unalterably opposed” to legalization.

The former congressman attributed his dramatic reversal on the issue to the potential for cannabis as a safer substitute for opioid painkillers, as well as the considerable number of nonviolent drug offenders in the US prison population. Boehner’s change of heart is more than just a quirky political news story, however; it speaks to the rapid pace at which mainstream acceptance of marijuana is growing, even as the drug remains illegal under federal law. Attorney General Jeff Sessions opposes legalization and in January withdrew assurances given by the Obama administration that the Justice Department would not seek to prosecute marijuana users or dispensaries in legal states, but more and more states are moving to decriminalize or legalize the use of marijuana for medical or even recreational purposes.

These changes have major implications for employers, many of whom are unsure how these new laws affect their workplace drug policies, or are beginning to wonder whether rejecting a candidate or firing an employee on the basis of their testing positive for marijuana is actually counterproductive in an uncommonly tight labor market. The latest benchmarking survey from the background-check firm HireRight found that 67 percent of US employers now have policies addressing medical marijuana use, Amy X. Wang reports at Quartz, compared just when 21 percent who said they had such a policy or planned to develop one six years ago.

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How Do We Close the Gender Pay Gap?

How Do We Close the Gender Pay Gap?

Equal Pay Day is a symbolic event that highlights the pay gap between men and women in the US. Equal Pay Day is held on a Tuesday, representing how far into the next week the average woman has to work to earn what the average man earned the week prior, and in early April to represent how much farther into this year she needs to work to earn as much as he did last year. While individual studies differ slightly, nearly all of them calculate the overall US gender pay gap at around 20 percent, meaning women earn roughly 80 cents to every man’s dollar. (It bears mentioning that these figures are significantly worse for women of color.)

To a significant extent, this gap reflects women being offered lower salaries than men for the same or similar work. Fast Company’s Lydia Dishman points to some recent research by Hired that suggests women are often being lowballed:

The majority (63%) of the time in the U.S., men are offered higher salaries than women for the same role at the same company, according to wage gap data and survey responses compiled by Hired. On average, these companies offer women 4% less than men for the same role, with some offering women up to 45% less. These numbers are likely due to unconscious bias, inconsistent pay practices, and paying new hires based on what they made in their previous role. “Our data found that 66% of the time, women are asking for less money–6% less on average–than men for the same role at the same company,” says Kelli Dragovich, senior vice president of people at Hired. Undervaluing themselves is part of the reason, she says, as 50% of female survey respondents said they experienced impostor syndrome most of the time.

However, even companies that pay men and women equally for equal work still have pay gaps, because women are often concentrated in professions with lower earning potential. Our recent research at CEB, now Gartner, finds that these group-to-group gaps account for most of the global gender pay gap of 27 percent, although 7.4 percentage points remain unexplained by factors like size, industry, geography, education, or experience.

The main cause of this larger pay gap is the sorting of women into lower-paying roles, or occupational segregation, Maggie Koerth-Baker explains at FiveThirtyEight. That doesn’t mean women are choosing to earn less money, however, and “the fact that certain industries are dominated by men or women — and that the men’s jobs pay more — has never just been about what qualifications an individual did or didn’t have, or how tough the job was to do”:

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Is ROI the Right Case for D&I?

Is ROI the Right Case for D&I?

Michelle Kim, co-founder and CEO of the diversity and inclusion consultancy Awaken, is tired of making the business case for D&I. That’s not because the business case isn’t strong enough, Kim writes in a recent post at Medium, but because she has found that the executives who demand a bottom-line argument for diversity are usually looking for a reason not to invest in it. In other words, “We’re wasting too much time trying to convince those who don’t have the desire to be convinced.”

The problem with making the case for D&I on the basis of the return the organization can expect to make on that investment, she argues, is that D&I is hard to do: It’s uncomfortable, it requires organizations to question their norms and processes, and it’s a long-term game with no quick fixes, in which progress is often hard to quantify. With a focus on ROI, it’s too easy to look at the short-term outcomes of a D&I program and conclude that it isn’t working, when really it’s just getting started:

Creating a diverse and inclusive workplace requires a multi-pronged, iterative, and long-term strategy. It takes real commitment to continue what sometimes could feel like an endless journey. Sometimes you’ll take one step forward and three steps back. You’ll need to constantly reevaluate your approach because the world of D&I is constantly changing (and it always will).

If you’re only focused on the quantifiable ROI of D&I, it’s not going to be enough to fuel this long term battle. You’ll end up looking for that “checklist” that merely gets you to comply with what’s minimally required. You’ll treat D&I as a crisis prevention strategy.

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Delaware Lawmaker Advances Bill to Combat Sexual Harassment

Delaware Lawmaker Advances Bill to Combat Sexual Harassment

State legislators in Delaware are considering a bill that would take an unusually aggressive policy approach to combating sexual harassment in the workplace. A bill introduced at the end of March by Rep. Helene Keeley would classify sexual harassment as an unlawful employment practices and require all organizations with 50 employees or more to give supervisors two hours of training on sexual harassment prevention every two years, the Delaware State News reports:

The measure offers a relatively broad description of sexual harassment, defining it as “unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature.” … The measure specifies an employer could be held responsible for sexual harassment when it “knows or should have known of the conduct and fails to take immediate and appropriate corrective action.”

The bill comes amid a slew of measures Delaware lawmakers are taking to strengthen the state’s policies against sexual harassment, including the adoption of written sexual harassment policies by the legislature itself and an attempt to add an Equal Rights Amendment to the state constitution, which recently passed the House for the first time, the News Journal adds.

The Delaware State Chamber of Commerce has expressed some reservations about Keeley’s bill and is making recommendations on how it might be amended, but does not oppose it in principle, according to the State News:

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Is a Two-Word Dress Code Good Enough for General Motors?

Is a Two-Word Dress Code Good Enough for General Motors?

Since taking up the position of CEO at General Motors in 2014, Mary Barra has undertaken to transform the culture of the storied American automaker. As the automotive industry and other legacy manufacturers find themselves increasingly in competition with big tech companies for talent—in Detroit’s case, a product of the race to market self-driving cars—they have had to expand their talent attraction strategies outside their traditional blue-collar comfort zone and reach out to candidates with very different expectations and values, as well as more diverse backgrounds.

Barra’s approach to culture change at GM has focused in part on simplifying rules and policies that might strike this new generation of talent as arbitrary and overly bureaucratic, such as the dress code, which she shrunk from a detailed section in the employee handbook to just two words: “Dress appropriately.” Barra told the story at the Wharton People Analytics Conference in Philadelphia last month, from which Quartz’s Leah Fessler passes it along:

After replacing GM’s 10-page dress code treatise with a two-word appeal, Barra received a scathing email from a senior-level director. “He said, ‘You need to put out a better dress policy, this is not enough.’ So I called him—and of course that shook him a little bit. And I asked him to help me understand why the policy was inept.” The director explained that occasionally, some people on his team had to deal with government officials on short notice, and had to be dressed appropriately for that.

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