Majority of U.S. Public Companies Concerned About Complying With Proposed CEO Pay Ratio Rule, Towers

Majority of U.S. Public Companies Concerned About Complying With Proposed CEO Pay Ratio Rule, Towers Watson Poll Finds

Only one in 10 companies believes disclosure will provide important information

NEW YORK--(BUSINESS WIRE)-- U.S. public companies are more concerned about the cost and effort likely to be involved in complying with the Securities and Exchange Commission's (SEC's) proposed CEO pay ratio disclosure rule than they are about how shareholders might react, according to a poll by global professional services company Towers Watson (NYSE, NASDAQ: TW). The poll also found that only one in 10 employers believes the CEO pay ratio disclosure will provide important information for investors and companies.

Last month, the SEC voted to propose a new rule that would require public companies to disclose the ratio of their CEO compensation to the median compensation of all other employees, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agency is accepting public comments on the proposed rule until December 2, 2013. The Towers Watson poll of 375 corporate executives and compensation professionals was conducted on October 1, during Towers Watson's national webcast on the proposed rule.

More than half (56%) of the respondents expressed concern about complying with the new disclosure requirement, with the most common concerns being gathering the pay data, determining their data-sampling approach and identifying the median employee. In comparison, less than one-third (31%) said their biggest concern was about where their CEO-to-worker pay ratio stood compared with their peers, the industry or the marketplace. Even fewer (21%) cited explaining the process of determining the ratio to shareholders as their biggest concern.

"Determining the best approach to identifying the median employee and calculating a pay ratio will be no easy task, especially for large global companies. There's a lot of uncertainty about what this will cost," said Todd Lippincott, North America leader of executive compensation at Towers Watson. "In fact, only two in 10 poll respondents agreed that they understand all of the costs, effort and data needed to comply with the new rule. Companies will need to spend time to figure out what the costs will be so they can provide meaningful estimates in their comments to the SEC."

The poll also found that only one-third of the respondents (34%) are comfortable that they have what is needed to comply with the disclosure requirement if they are required to do so in 2015.

"The companies that we have been meeting with are beginning to get their arms around the proposed rule and the work that will be required to comply, even though most don't believe it will provide important information for investors. While the flexibility that the SEC provided in calculating a pay ratio is helpful, companies will need to decide on an approach that's valid and defensible because they know that many stakeholders will be taking a close look at these disclosures," said Lippincott.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.

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binoli.savani@towerswatson.com

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