May 5, 2020

Farient CEO Pay Ratio Tracker Update – May 5, 2020

Off-Price Retailer and a Medical Innovator: Pay Ratios of the TJX Companies and Penumbra

Welcome to the eighth installment of Farient’s Pay Ratio TrackerTM update. Each week, we focus on the companies with the highest and lowest CEO-to-median-employee pay ratios. This week, we explore the highs and lows of the third week of April’s pay ratio disclosure with The TJX Companies (TJX) and Penumbra PEN). As a reminder, the CEO-to-median-employee pay ratio is one of the provisions from the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act implemented in 2018.

The TJX Companies: Taking CEO Pay to the Maxx

The TJX Companies, Inc. (TJX) is a $42 billion multinational apparel and home goods retailer best known for its TJ Maxx stores, which were once described by Business Insider as “Macy’s worst nightmare” because of their low prices on many of the same products. That low pricing model also extends to TJX’s other well-known chains like Marshall’s and HomeGoods. Last week, TJX reported a CEO pay ratio of 1,590:1, the highest of any company reporting a pay ratio during our observation period.

Low Prices, High Pay

TJX’s high pay ratio is a result of both high CEO pay and low median employee pay. The CEO has been awarded between $16MM and $21MM each year of his tenure, which began in 2016. In contrast, TJX’s median employee, a part-time hourly retail store associate, received total compensation of $12,006 last year, considerably below the 2019 average median employee pay of $26,216.

Penumbra: Not Another Bloodless Pay Plan

Penumbra (PEN) is a $500 million medical device manufacturer working to solve challenging unmet medical needs. PEN reported a CEO pay ratio of 10:1 in 2020, down from a 14:1 ratio in 2019.

The Company was co-founded in 2004 by Adam Elsesser, who has served as the Company’s only CEO, owning roughly 3% of shares outstanding. Throughout his tenure as CEO, Elsesser has made his preference clear that the Compensation Committee limit his cash compensation and invest more heavily in other areas of the business. To that end, Elsesser takes a $725K salary and has received no annual bonus or long-term equity compensation since the Company’s IPO in 2015. PEN’s low pay ratio was also driven down by relatively high median employee pay of $71,088 for its approximately 2,200 employees; for reference, the average median employee in the health care sector made $66,047 in 2019.

Farient’s Takeaway:

While CEO pay is obviously important in driving a Company’s pay ratio, median employee pay can have just as strong of an impact. This week’s update to the Pay Ratio Tracker features two companies that both provide surprising pay levels on either side of the ratio—just in different directions. Investors should always remember to look beyond the obvious to consider all factors at play when drawing conclusions and making decisions.

Farient‘s CEO Pay Ratio Tracker™ provides updates on CEO to median employee pay ratio throughout the proxy season. In addition, for real-time information on Say on Pay votes, please visit our Say on Pay Tracker™ at Farient.com.

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