With dozens of S&P 500 proxy statements hitting the SEC’s EDGAR system each day, the number of pay ratio disclosures available for analysis and comparison has reached a critical mass. However, the vast number of pay ratio disclosures has begun to generate questions in the media and elsewhere about what the data actually means – if anything. As the Center highlighted last week in our update, commentary is already emerging which calls on the SEC to make changes to the rule – in this case changing the treatment of part-time employees – to remedy the misleading nature of the disclosure. This week, questions about the pay ratio continued, with a thoughtful analysis of whether the pay ratio’s can be used to compare peer companies appearing in the Wall Street Journal. The article evaluated the disclosed pay ratio calculation methodology Verizon Communications and AT&T each used, with the goal of trying to answer the question of what the difference between the two companies’ median employee mean – if anything. The Center has long argued that the highly customizable methodologies available to companies – all of which are entirely unique in business structure – will render any peer-to-peer comparison of pay ratio misleading at best. The Journal article reinforces that point, beginning with an insightful discussion of the differences between AT&T’s and Verizon’s business, including differences in workforce composition and business structure. Notably, the article makes a very interesting technical point, explaining that “[c]ompanies aren’t exactly disclosing a median pay figure, which is the point at which half their workers make more, and half less. Rather, they are disclosing the total pay of a specific individual identified as their median worker.” This, according to the article -- and as the Center has repeatedly pointed out -- is because “firms have…leeway in identifying [the] median worker” through the design of the methodology, which flexibility is necessary given different business and operating structures. The Center believes commentary questioning the value of the disclosure, especially for comparing peers will build as more pay ratios are disclosed and various analyses are performed on available data.