Many are aware of the Dodd-Frank requirement to disclose the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer. We have published some examples of early adopters.
Others have taken the internal pay equity issue further and disclosed ratios related to the CEO’s compensation to other named executive officers. We have set forth examples below:
|BEST PRACTICE ELEMENT||OUR PRACTICE|
|No excessive pay differential between CEO and next highest paid executive officer||The pay ratio between the CEO and the next highest paid executive was 3.4 in fiscal year 2015, which we believe is reasonable.|
Internal pay ratio between our Chairman and Chief Executive Officer and our President and Chief Operating Officer is not excessive.
Review of Total Compensation Structure and Internal Pay Ratios
Each year, the compensation committee reviews the total compensation structure for each NEO, including the elements and mix of compensation, levels of historic compensation, potential termination and retirement benefits, internal equity, and IDACORP stock ownership, to determine whether it should adjust an executive officer’s total target direct compensation. The internal pay equity analysis presented by our management showed the ratios below for internal pay equity based on proposed (as of the date of the review) 2015 total target direct compensation amounts.
|Officer Comparison Set||Internal Pay Ratio – 2015 Total Target Direct Compensation|
|CEO to executive and senior vice presidents||2.68x|
|CEO to pay grade S-3 and higher senior managers||9.13x|
|CEO to all senior managers||10.86x|
Based on these reviews, the compensation committee determined that no changes to the general structure of our compensation programs or to the forms of compensation payable to our executive officers for 2015 were necessary, though it did make some adjustments as described below. In making this determination, the compensation committee relied on its subjective judgment.
Reasonable CEO/NEO Pay Ratio
* Our CEO’s total target direct compensation (consisting of base salary, target bonus and equity awards [collectively, “TTDC”]) is reasonable at 1.8x the TTDC of our next highest paid Executive.
CEO Pay Ratio. An executive officer’s salary plus bonus represents the officer’s total cash compensation. Our philosophy has been to have the CEO’s total cash compensation be between 20-30 times the lowest levels of compensation received by an employee. Dr. Crooke’s total cash compensation, over the last three years, was on average 26.13 times that of the average cash compensation for our lowest level employees and 2.03 times greater than the average of our other executive officers.
ABOUT STINSON LEONARD STREET
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The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.