That the Human Resources Committee (“HRC”) of the Board of Directors commission a report, on an annual basis, on the pay grades and/or salary ranges of all classifications of Thomson Reuters Corporation employees, to be considered by the HRC when setting target amounts for compensation of Named Executive Officers (“NEOs”). We also ask that the Board of Directors describe in the company’s proxy circular how it takes compensation, advancement and retention practices throughout the organization into consideration in setting NEO compensation, and ensures that the company’s approach to rewarding and retaining talent is consistently applied.
Thomson Reuters’ HRC uses peer group benchmarks to set its target NEO compensation. While these benchmarks may be relevant to certain aspects of executive compensation, the use of horizontal benchmarking can skew compensation practices at the top end of a company’s pay structure and lead to high CEO-to-median-worker pay ratios.
Over-reliance on horizontal benchmarking can also produce a disconnect between the retention and incentive practices used at the top-end of the pay structure and those used to motivate and retain employees in the rest of the company.
High CEO-to-worker pay ratios can impact the morale and productivity of non-executive employees. They can send a message about a company’s culture and values to employees.
Traditionally investors review a company’s internal pay equity based on the ratio between the total compensation provided to the CEO as compared to the median pay of the other NEOs. While this is not a reliable indicator of pay disparities throughout the organization, it can sometimes be a marker for broader concerns with compensation vertically across a company. In the case of Thomson Reuters, the CEO’s pay was more than four times higher than the median pay of the other NEOs in the last published year. Thomson Reuters’ internal pay equity ratio was higher than all but two of the companies in its comparator group for 2017.
Total CEO compensation at the company has grown steadily over the past four years, and is high relative to its peers when compared to average employee salaries and benefits.
To ensure that Thomson Reuters’ executive compensation is reasonable relative to its overall employee pay philosophy and structure, we ask that the HRC consider the pay grades and/or salary ranges of all classifications of Company employees when setting NEO compensation target amounts.
We are not requesting that the HRC adopt any specific approach to considering this data when setting NEO compensation targets. We trust that the HRC will exercise appropriate discretion to determine how information in the proposed report factors into NEO compensation targets and report on its approach in the proxy circular. We recognize that the HRC may continue to use peer group benchmarks and other metrics to set NEO compensation target amounts.