Get Ready To Deal With Pay Ratio, Sustainability, Campaigns

Mandatory pay ratio disclosure is coming, with only the details remaining to be worked out, and they probably will be this year. Reporting about “sustainabilitiy,” a more amorphous category, is in the cards as well. As for the first, no matter how it ends up being reported, the pay ratio (between lowest and highest paid public company employees) will be very high and the public pressure to reduce it will be, accordingly, highly charged, says Charles Nathan, partner and head of the corporate governance practice at RLM Finsbury. He suggests ways companies should deal with both the compliance requirements and the likely fallout. Among his recommendations: “Develop and hone the company’s explanatory narrative.” As for the second category, “sustainability,” he notes the lack of precise definition and the multitude of ways to measure it are factors that cut both ways from the company point of view. “Providing an annual report on sustainability will have a positive ‘check the box’ compliance effect,” he says. “But unless the report focuses on the company’s most salient sustainability challenges, it can all too easily become the source of investor criticism and wind up doing more harm than good.” He has some concrete suggestions for how make the most of it.