Omnicom, IPG Reveal Exactly How Much More Their CEOs Make Than Employees
Omnicom Group and Interpublic Group, two of the largest advertising holding companies, have released statements revealing the ratio of their CEOs’ pay to that of their employees’ median pay, a disclosure mandated starting this year by Dodd-Frank.
Omnicom says its CEO John Wren makes 596 times its employees’ median pay, while IPG’s Michael Roth makes 264 times the median.
Companies this year began issuing the pay-ratio statements, a “potentially embarrassing math calculation” showing for the first time how much more their executives make than their rank and file. But experts caution that it’s important to consider the variables in how companies report the information.
“The SEC has stated specifically that ratios are not comparable from company to company because of the wide range of underlying methodologies by which they can be calculated,” says Joe Mallin, a Partner at Pay Governance. He says the determination of who a median employee is and the calculation of that person’s pay “can vary a lot from company to company.” Geographical locations can also have a big impact on these figures.
“All these newspapers that are going to put 50 companies together and compare the ratios, it’s all built on quicksand,” he says.
Mallin does note that the median employee pay is an interesting new number to examine.
Omnicom’s statement, released Thursday, reveals that the annual total compensation for its median employee was $40,230.30 in 2017. The total compensation of its CEO, John Wren, was $23,959,325 in that same year — making the ratio of Wren’s annual total compensation to the median of the annual total compensation of all employees excluding him approximately 596 to 1.
To calculate its median pay, Omnicom included all full-time and part-time employees except Wren and staff “located in jurisdictions with a de minimis number of employees”—which meant it didn’t include “4,944 individuals who provided services to us” in Colombia, Egypt, Indonesia, Malaysia, Mexico, Thailand and Ukraine. Omnicom declined to comment on its pay ratio.
IPG’s proxy statement, released Wednesday, says the median of the annual total compensation of all employees excluding Roth was $63,936 in 2017. Roth’s total annual compensation for 2017 was $16,883,818. The company included its full-time, part-time and temporary employees in its calculations, the filing said.
“IPG believes bringing transparency to compensation strategies is good policy,” an IPG spokesman said in a statement to Ad Age.
The pay ratio reports have drawn attention to companies like Mattel, whose CEO Margo Georgiadis was paid 4,987 more than its workers’ median pay. Then you have companies like Berkshire Hathaway, where Warren Buffett made a mere 1.87 times the median.
Brian Wieser, senior analyst at Pivotal Research, says the gender pay gap information now required in the U.K. is more interesting to examine.
“That’s something that’s almost actionable,” he says. “This is not, this is meaningless.”
Wren taking on chairman role
In the same proxy statement on Thursday, Omnicom said that Wren, 65, will add the title of chairman at its annual meeting next month. Bruce Crawford, 89, chairman since 1995, is retiring, the company said. Wren succeeded Crawford as CEO in 1997.
”In line with the Board’s previously disclosed retirement age policy, Omnicom’s Executive Board Chair Bruce Crawford is retiring at this year’s Annual Meeting,” the statement says. “The entire Board and management team thank Mr. Crawford for his dedicated leadership and the valuable insights he has shared over the years.”
The company also now has a “lead independent director,” Leonard S. Coleman, assigned to “provide continuity and stability while we experience change at the Board and management levels.” The company said shareholders “indicated a preference for independent leadership on the Board, and were supportive of a lead independent director provided the scope and nature of the role were robust and well-defined.”