Among the Pay Ratio Rule guidance resources addressed in yesterday's weekly Society Alert was this new Pearl Meyer article: "Weigh the Human Factor When Communicating the CEO Pay Ratio" - which notes that while the accuracy and compliance of the data-driven CEO pay ratio and related disclosure are of course critical, it is equally important that companies also recognize and plan for individual employee reactions to the disclosure - which may likely be very personal, adverse and perhaps objectively irrational:
From an individual worker's perspective, the median employee pay is not rooted in data or even necessarily facts. First, the median employee pay represents an actual person, a co-worker, and the amount that person earns. Second, most people won't care to think about the data that led to the disclosed number. Most will think about how their pay compares to that number and will internalize the data and assign meaning in a unique and possibly unpredictable way. Every person with any knowledge of the ratio will have some feeling toward it. Some will be ambivalent, but many will care greatly—and they pose the highest risk of distraction to your organization and a potential danger to productivity and engagement.
Among other things, the firm advises companies to place the "human factor" on par with developing the disclosure, and concurrently consider a series of suggested practical action steps to mitigate the potential adverse effects associated with employee reactions. Suggestions include developing a plan of action for well-considered communications geared toward employees that may consist of, e.g., broadly- or narrowly-distributed FAQs devised via a management brainstorming session, management training, a triage approach, and/or a combination of these.
Watch for additional guidance in the weekly Society Alert, and access numerous additional resources on our Pay Ratio topical page.