Institutional Shareholder Services (ISS) released the results of its annual global benchmark voting policy survey on September 25, 2017. In a surprise result, the survey found that nearly 75 percent of the 131 investor respondents indicated that they intend to use pay ratio disclosures as one factor in their analysis of compensation issues. Those respondents indicated they would analyze a company’s pay ratio by comparing it to that of other companies in its industry, by assessing year-over-year changes in the company’s ratio, or both.
The survey results contradict the commonly held view that investors will simply ignore the pay ratio disclosures. Rather, it suggests that companies should be prepared to engage with their shareholders if their pay ratio results fall out of line with their peers or substantially change from year to year.