August 18, 2010
I have been the General Counsel and Corporate Secretary of two NYSE public companies, have over 20 years of in-house public company experience, and have had extensive involvement for many years in the proxy statement process.
With that perspective, I have a number of concerns with the requirements of the Dodd-Frank Act. However, among my chief concerns is the requirement to develop and disclose a median annual compensation figure for all employees.
Developing accurate total compensation figures for the CEO and other NEOs in accordance with current SEC rules is a complex and extremely time-consuming process for public companies. Collecting, organizing and analyzing this kind of data for all employees in order to develop a median comp figure would be extremely complex, time-consuming and burdensome, assuming this is even possible given the potential number of employees, different classifications of employees, employee turnover rate, employees subject to different jurisdictions as to what is included and excluded from compensation, benefits uniquely attributable to certain classifications of employees and not others, etc.
Frankly, I can not imagine how companies would have the resources the develop this kind of figure without spending huge sums of money on outside consultants (without alleviating time ultimately spent by the GC/Secretary, Finance, the Compensation and Audit Committees and the auditors), only to end up with a figure and related disclosure that will lack any real meaning and value given the volume of disparate underlying data.
So while I could understand a requirement to analyze and disclose median comp of other NEOs relative to the CEO, I simply can not envision how a meaningful (and accurate, whatever that would mean in this case) "all employees" median comp disclosure would be capable of being developed in any feasible manner, particularly in view of the numerous other existing and new disclosures.
That said, assuming the requirement stays intact, I would urge the SEC to form a task force that includes law firm lawyers as well as public company GCs/Secretaries and auditors to develop a workable solution.