Wednesday, May 20, 2015

Move CEO pay to the front of your screen, communicators

New research and rules mean it's time to put CEO pay on the front of your screen, communicators.

Harvard Business Review published this summary of recent research that suggests that there's a big gap in what people estimate a CEO or chairman actually make and what they estimate the leaders should make. The HBR chart at left tells the tale: In 40 different countries, people estimate oversized salaries for CEOs (in red), but feel their earnings should be much smaller (in blue).

That holds true, the findings suggest, even when respondents are on opposite sides of the gap issue: "whether people agree or disagree that current pay gaps are too large, they agree that ideal gaps should be smaller." So now you know how big compensation will play with the masses, and it's not good news. That shouldn't surprise anyone. Despite the thought that the U.S. economy is improving, many workers' wages have dropped 50 percent from pre-recession levels, making the CEO-worker pay gap seem even wider.

Public companies are about to get new Securities & Exchange Commission rules that will help investors better understand executive pay, and those, too, are a reason for communicators to get up to speed on CEO salaries and benefits. If the rules are approved, proxy filings will show "actual pay" for key executives. While shareholders rarely change CEO pay, the optics get increasingly bad, with salaries going up 12 percent annually, the New York Times reports. Want to know what reporters look for to calculate executive pay? The Times obligingly shares what it used to calculate CEO salaries...and here's the big article that resulted from its research.

One thing for all communicators to keep in mind: The more executive pay is covered, the more media inquiries and social media conversation you can expect on the topic. Someday, you'll get that question. That's true regardless of your sector, since reporters and other observers will feel free to compare, say, your university president's salary to that of a for-profit CEO, and vice versa. UPDATE: Frank Bruni's New York Times column today on university presidents' compensation does just that.

My 2010 post on What communicators should know about nonprofit executive compensation walks that sector's communicators through sensible steps any communicator can follow. It's a good practice to sit down with your financial officers to review the information, make sure they understand your process for public and media inquiries, and get ready for those inquiries. The HBR data above are a great back-pocket tool for you, helping to make the case that your organization or company needs a strategy for the increased exposure and likely negative attention that executive pay can generate.

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