CEO pay ratio disclosure rules under the Dodd-Frank Act, along with the Securities and Exchange Commission's recent rulemaking on executive compensation, have thrown CEO pay into the spotlight in 2016.
Here are five things public healthcare organizations need to know about the executive compensation regulations.
1. The pay ratio rules require companies to disclose the total compensation of the CEO, the median of the yearly total compensation of all other employees and the ratio of these two numbers, according to a JD Supra report.
2. The pay ratio rules do not kick in for most companies until their 2018 proxy statements. However, companies should begin to understand what their pay ratio will look like now, as compliance with the rules is not a simple task. "Being able to explain why the CEO's compensation is what it is will be paramount. Not only will this explanation be important for investors, but boards also need to be concerned about how company employees will react to this information," according to JD Supra.
3. Along with the pay ratio rules, publicly traded companies should also be mindful of other Dodd-Frank rules that the SEC proposed in the last year, including a proposal the SEC floated last April.
4. The so called "pay versus performance" proposal is aimed at making it easier for investors to determine if executives are being appropriately compensated. The proposed rules "would provide greater transparency and allow shareholders to be better informed when they vote to elect directors and in connection with advisory votes on executive compensation," the SEC said in a news release.
Under the proposed rules, companies would be required to adopt a standardized form of disclosing executive pay and comparing it to company performance, including a comparison to industry competitors.
5. Although most public companies already conduct an executive pay-for-performance analysis, only one-third of those companies disclose the findings of their analysis, according to JD Supra.
More articles on executive compensation:
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Indianapolis hospital CEOs have seen little or no pay raise since 2012
CEO and CFO pay increases fueled by pressures of consumer-driven healthcare market: 5 findings