CEO Pay Ratio

The CEO pay ratio is a single company-level comparison: the chief executive’s total compensation for the fiscal year divided by the total compensation of the employee the company identifies as sitting at the midpoint of its workforce’s pay distribution. It is reported as a ratio, read as so many times greater, and it is disclosed together with the two pay figures it was built from rather than standing alone.

The disclosure exists because of Dodd-Frank Section 953(b), which directed the SEC to write a rule requiring it; the implementing rule sits at Item 402(u) of Regulation S-K. It applies to the fiscal year covered by the proxy and appears alongside — not inside — the Summary Compensation Table. The numerator is the chief executive’s Summary Compensation Table total for that year, the same figure the table itself prints.

The denominator is the harder half. The rule does not prescribe one method for finding the median employee. A company may rank the total compensation of its entire employee population, apply a statistical sampling method, or use another reasonable approach, provided it discloses what it did and the assumptions behind it. That latitude is deliberate, but it means two companies can arrive at their medians in genuinely different ways while reporting the same kind of ratio.

The methodology also has moving parts inside it. The company defines the employee population it will measure, which determines whether part-time, seasonal, temporary and non-U.S. employees are included in full, in part, or excluded under the rule’s de minimis allowance. It picks a determination date, which the rule requires to fall within the last portion of the fiscal year. It may annualize the pay of permanent employees hired partway through the year, and it may make cost-of-living adjustments when measuring employees in different jurisdictions.

Once a median employee is identified, the company does not have to repeat the full exercise every year. The rule permits the same median employee to be used for up to three years, provided there has been no significant change in the employee population or in employee compensation arrangements. A significant change — a large acquisition or divestiture, a broad restructuring, a shift in how the workforce is composed — requires a fresh identification sooner.

The ratio moves with either half. A chief executive who receives a large one-time equity award, or a new chief executive whose pay reflects a partial year or a sign-on grant, moves the numerator. A change in workforce composition, a change in the determination date, or a switch between a full-population ranking and a sampling method moves the denominator. A rising ratio therefore does not by itself mean the chief executive was paid more, and a falling one does not by itself mean the median employee was paid more.

Read alone, the ratio compresses a great deal. The same ratio can describe a company with high executive pay and a high median, and a company with more moderate executive pay and a much lower median. It is also strongly shaped by workforce structure: a company that employs a large population of part-time or seasonal workers in lower-paid roles will typically report a higher ratio than a professional-services firm with similar executive pay, because the midpoint of its workforce sits lower.

Because the ratio is a ratio of two pay figures computed on a total-compensation basis, it is not a measure of pay fairness, of the company’s internal pay structure beyond that one comparison, or of whether any individual was paid appropriately. Its most useful reading is next to the two halves the proxy prints with it, and next to the methodology narrative the company is required to provide.

Flex disclosed a 3,431:1 CEO-to-median-employee pay ratio for fiscal 2026: $44,391,138 against a $12,939 median.