Thanks to my colleagues Amy Wood, Dani Nazemian and the intrepid Mariane Konstantaras, all three of our Comp & Ben Group, we now have a sighting of pay-ratio disclosure under the new pay-ratio rules, Reg S-K Item 402(u). Apparently, the first example was not in a proxy statement but in a Form S-1 registration statement filed with the SEC yesterday.

The company is Invivo Therapeutics Holdings Corp. In this example, the consistently applied compensation measure used to determine the median employee was simple base salary. Given that the company has only 16 employees, there was no need to resort to elaborate statistical sampling, de minimis exemptions or COLA adjustments. However, the example is not without its own complexity: not only were there two CEOs during the year, but it turned out that there were also two median employees, and the example describes how each was selected and assumptions and adjustments made.

Pay Ratio

Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. We determined our median employee based on base salary (annualized in the case of full- and part-time employees who joined the Company during 2017) of each of our 16 employees (excluding the Chief Executive Officer) as of December 1, 2017. Of the two potential median employees, we selected the employee without significant severance payments. The annual total compensation of our median employee (other than the Chief Executive Officer) for 2017 was $384,528. As disclosed in the Summary Compensation Table appearing on page 76, our former Chief Executive Officer’s annual total compensation for 2017 was $2,471,333. Our former Chief Executive Officer served in this capacity from January 1, 2017 to December 18, 2017, which includes December 1, 2017, the date of determination for the median employee. As noted in the footnotes of the Summary Compensation Table, Mr. Perrin’s salary in the Summary Compensation Table includes a payment of 10 days salary in conjunction with his resignation in lieu of the notice period in his Employment Agreement, so his annual total compensation includes salary for a full year. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 6.4 to 1. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.”

SideBar

Under the rules, where more than one person served as CEO during the year, the company may choose between two options in calculating CEO annual total compensation: combining the total compensation as reflected in the Summary Compensation Table for both CEOs or using the total compensation for the CEO serving in that position on the date the company selects for identification of the median employee and annualizing that CEO’s compensation. In either case, the company must disclose which option it chose and how it calculated its CEO’s annual total compensation