October 10, 2013
Elizabeth M. Murphy
U.S. Securities and Exchange Commission
100 F St. NE
Washington, DC 20549-1090
Re: Pay Ratio Disclosure, File No. S7-07-13
Dear Ms. Murphy,
On behalf of Pax World Funds (www.paxworld.com), I write to support the U.S. Securities and Exchange Commissions proposal requiring disclosure of the CEO-to-worker pay ratio as mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As investors in publicly traded corporations, we strongly believe that this information will benefit investors.
The ratio of CEO to worker pay at individual companies is, in our view, material to investors. High pay disparities inside a company can hurt employee morale and productivity, and have a negative impact on a companys overall performance. Moreover, disclosure of the median employee pay will help investors better understand companies overall compensation approach to developing human capital.
Investors will also be able to use CEO-to-worker pay ratios as an additional metric for evaluating say-on-pay votes and other executive compensation issues. Pay ratio disclosure helps investors evaluate CEO pay levels in the context of companies internal compensation structures. Investors will be able to see how the ratio changes over time at individual companies and compare companies within industries.
As required by Dodd-Frank Section 953(b), the proposed rule appropriately requires companies to disclose the median pay of all of their employees. Given recent labor market trends, many publicly traded companies employ significant percentages of international employees or part-time employees, sometimes in order to avoid paying benefits. This can harm employee morale and productivity. Investors will receive an incomplete picture of their companys pay practices if these employees are excluded from the disclosure.
Many commenters noted that it would be overly burdensome or complex to assemble and verify such information. In particular, some noted that registrants typically compile information required by Item 403(c)(2)(x) manually for named executive officers, which takes significant time and resources. However, we do not believe that most employees compensation is as complex as that of named executive officers, whose total compensation generally consists of several components, while that of most employees is likely to be salary and benefits or only salary. The SECs proposal to allow flexibility in how the median compensation of non-PEO employees makes it considerably less burdensome to produce this information. Many corporations manage large global supply chains involved in complex production of a wide variety of goods and services. Arguing that such companies are incapable of keeping track of employee compensation adequately to compute median compensation is frankly difficult to fathom. Particularly with the flexibility afforded by the proposed rule, we believe that companies should be well able to provide this information without undue difficulty or expense.
Finally, we are satisfied that the SECs proposed rule as written applies broadly enough to serve investor needs most of the time that it need not apply to companies that are not obliged to comply with Item 402 requirements in Regulation S-K.
Please act swiftly to adopt the final rule implementing Section 953(b) of the Dodd Frank Act. Investors will benefit from this additional disclosure on executive compensation and in making investment decisions based upon such information. Thank you your consideration.
Julie Fox Gorte
Senior Vice President for Sustainable Investing