This metric is based on the Global Reporting Initiative (GRI) G4 Guidelines. It covers part of the information required by G4-54 - 'Report the ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country.' In addition, G4-54 asks to calculate this ratio for each country of significant operations.
The remuneration arrangements support the strategic aims of the organization when aligned with the interests of stakeholders. They can enable the recruitment, motivation, and retention of members of the highest governance body, senior executives, and employees.
The annual total compensation includes salary, bonus, stock awards, option awards, non-equity incentive plan compensation, change in pension value and nonqualified deferred compensation earnings, and all other compensation.
To calculate the ratio of the annual total compensation for the organization’s highest-paid individual to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country - G4-54:
- Identify the highest-paid individual for the reporting year, defined by total compensation
- Calculate median annual total compensation for all employees except the highest-paid individual
- Calculate the ratio of the annual total compensation of the highest-paid individual to the median annual total compensation for all employees
Depending on the organization’s remuneration policy and availability of data, the following components may be considered for the calculation:
- Base salary: guaranteed, short term, non-variable cash compensation
- Cash compensation: sum of base salary + cash allowances + bonuses + commissions + cash profit-sharing + other forms of variable cash payments
- Direct compensation: sum of total cash compensation + total fair value of all annual long-term incentives (such as stock option awards, restricted stock shares or units, performance stock shares or units, phantom stock shares, stock appreciation rights, and long-term cash awards)
- Please see this page for guidelines on how to research values for GRI-based metrics.