NY State Pension Reaches Agreements with Firms on Executive Pay

Microsoft, CVS, Macy’s, TJX, and Salesforce agree to revisit pay policies.

The $207.4 billion New York State Common Retirement Fund has reached agreements with Microsoft Corp., CVS Health Corp., Macy’s Inc., The TJX Companies Inc., and Salesforce to revisit their CEO and executive pay, and adopt policies that take into account the compensation of the rest of their workforces.

As a result of the agreements, the fund has withdrawn shareholder resolutions with the companies on the matter.

New York State Comptroller Thomas DiNapoli, who oversees the state’s retirement fund, said it was common among US companies’ compensation committees to use peer group benchmarks to set their target CEO compensation. He said that although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay well above the median. He added that these peer groups can also be “cherry-picked” to include larger or more successful companies that have higher compensation rates for their CEOs.

“We’ve seen a growing disparity in corporate income in the United States for years, with CEO pay rising dramatically while wages for most other company employees have remained flat,” DiNapoli said in a release. “We are encouraging companies to adopt policies that take their entire workforce into consideration rather than setting CEO pay solely by benchmarking it against other CEOs.”

The New York state comptroller’s office cited statistics from the Economic Policy Institute that found that the wage gap between workers has been rising sharply over time. It said that the CEOs of the largest companies in the US earned $271 for every dollar their employees earned in 2016. This gap was more than twice as much as it was in 1995, when the CEO-to-worker pay ratio was 123-to-1. In 1978, it was 30-to-1; and in 1965, it was 20-to-1.

Disclosure of companies’ CEO pay ratio was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and implemented by the SEC in 2015. Companies may disclose supplemental information about their workforce to provide context and explain their company’s pay ratio data.

In addition to the five companies that have agreed to the requests in 2018, the fund already has similar agreements with bank BB&T Corp.,

Discovery Communications Inc., and Regeneron Pharmaceuticals Inc. The fund said it currently has issued a similar proposal with food processing and commodities trading company Archer-Daniels-Midland Co.  and will file with several other companies in the coming year.

“Overall employee compensation and executive pay has been and will continue to be a key factor for how we engage with companies going forward,” DiNapoli said.

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