Subject: File No.
From: Angelo M. Ninivaggi, Jr.
Affiliation: General Counsel, Plexus Corp.

March 22, 2017

In response to Acting Chairman Michael S. Piwowars public statement on February 6, 2017, Plexus Corp. submits the following comments on the CEO Pay Ratio provisions (the Pay Ratio Rule) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Plexus Efforts to Calculate the Ratio
Plexus recently performed a preliminary analysis to assess the difficulty of gathering information to comply with the Pay Ratio Rule in anticipation of implementation in 2018. Assessing the various calculation methodologies alone was complex and time consuming, but we felt compelled to do so to understand potential outcomes and what they would message. Undoubtedly, other issuers will do this also and it will result in a wide variety of methods used to calculate the ratio.

With a calculation methodology chosen, our effort to identify median pay was also significant. The analysis required resources from each of the countries in which we operate to consolidate and assimilate compensation data from multiple pay systems. Because compensation programs can differ dramatically from region to region based on market practices, it was challenging to derive a total compensation analysis. Non-cash compensation elements were particularly difficult to capture and quantify.

In addition to these costs and efforts, we will incur legal and consulting costs to verify and validate our calculations and review our proxy statement disclosures. Of course, this will consume time as well from our Board of Directors, which will need to be educated on the rules requirements, oversee our compliance approach, and approve disclosures. Finally, we will have to develop communication plans for employees and investors relating to the rule, which may be challenging given uncertainty as to how they will interpret these ratios.

While we have not kept a detailed record of the time spent by various individuals throughout our company on this effort, without difficulty, we anticipate that our cost to comply with the Pay Ratio Rule will easily exceed $100,000 per year. Not included in this figure, incalculable and often overlooked or underappreciated, is the opportunity cost that this compliance effort imposes on Plexus. Employees and directors could be devoting time and effort on much more impactful matters.

What will be gained by the Pay Ratio Rule?
The cost and burden to comply with the CEO Pay Ratio Rule must be evaluated against the benefits promised from it. Proponents of the rule may emphasize that the disclosure helps shareholders evaluate CEO pay when voting on executive compensation matters, such as say-on-pay, or on the election of directors. They also suggest that it will provide insight into the disclosures effect on employee morale, as they believe that high levels of CEO pay relative to other employees will detrimentally affect morale. As a result, they claim that the CEO pay ratio disclosure, therefore, may cause companies to modify their compensation in a positive way. They also apparently believe that it will stem the rise of executive compensation since the new metric will show the distribution of pay within a particular company instead of across other companies, such as a peer group. We resolutely disagree that the CEO Pay Ratio will result in these outcomes.

Compensation committees and investors already have methods to evaluate what they consider appropriate CEO pay. CEO pay ratio metrics will not alter their approach because they are valueless in assessing the appropriateness of CEO pay. First, the assumption, or aim, of the CEO Pay Ratio Rule, presumably, is that there is a correct ratio or ratio range for a CEO. This mindset amounts to a rejection of free markets to set value (in favor of whom?), which we frankly find absurd. Second, no shareholder could reasonably form a view, positive or negative, of CEO pay ratio disclosures. Companies vary greatly with respect to workforce demographics, no two companies being alike. For example, a US corporation may have a lower ratio than a multinational as a result of currency, cost-of-living, or minimum wage differences. A higher proportion of hourly, part-time, or seasonal workers may also skew ratios significantly, as would employers who offer disproportionately high opportunities to workers first entering the workforce. Finally, the various alternatives to calculate the ratio will make comparisons among companies unmeaningful. Thus, the ratio is more likely to be influenced by the demographic makeup of a companys employee base and/or the calculation methodology chosen than the CEOs compensation. This could potentially mislead shareholders rather than help them. For these reasons, shareholders themselves have shown little support for pay ratio proposals. Since 2010, 15 shareholder resolutions advocating pay ratio forms of disclosure received the support of less than 7 percent of shareholders at such companies.

Next, if the goal is to surface or avoid employee morale problems as a result of disproportionate pay, existing CEO pay disclosures already provide extensive and accessible data that could cause such morale issues. Employees can easily determine how their compensation compares to that of executives. Additionally, consider whether it is appropriate or effective to use the securities laws, intended to protect investors, to promote social goals, no matter how noble. We do not believe so.

Lastly, it strains credulity that calculating and disclosing CEO pay ratios will reduce or stem the rise of CEO pay, even assuming that CEO pay is a problem. To the dismay of pay ratio proponents, it could actually increase CEO pay if compensation committees commence using the pay ratios of competitors as a benchmark when determining compensation. This could create a broader increase in compensation across industries, which some believe was the consequence of previous compensation disclosure regulations or reforms.

For all of the reasons discussed above, we strongly believe that the benefit, if any, of the pay ratio disclosure is scant compared to the burdens that it imposes on pubic issuers. Further, the information itself is likely to be meaningless at best, or misleading at worst, and not well aimed to achieve its stated goals. We therefore respectfully urge that the Commission take action to reduce or eliminate the burden on issuers of this regulation, and take this action rapidly due to the coming deadline and the need for issuers to incur substantial additional costs of compliance in the near future.