Now that 2018 annual reports are mostly filed, the 2018 proxy statements are starting to arrive. That means we can move on to our next piece of financial data to analyze: the CEO Pay Ratio.

That number compares the CEO’s total annual compensation to annual compensation of the firm’s median employee. The SEC began requiring pay ratio disclosure in 2017 proxy statements — which means this year’s proxy statements offer our first instance to see how that ratio is changing over time.

Calcbench users can search for CEO Pay Ratio disclosure. Just go to our Multi-Company or Interactive Disclosures pages, and enter “CEO Pay Ratio” in the standardized search metrics field on the upper left. That will return the pay ratio disclosed by whatever companies you are researching.

What can we say about CEO pay ratios so far? A few things…First, it’s early in the proxy season, so financial analysts don’t have many 2018 pay ratio disclosures so far. We searched the S&P 500 and found only 21 firms that have reported pay ratios for both 2017 and 2018. But more such disclosures will be coming as proxy season unfolds, so if CEO pay is something you study, you’ll want to check back with us regularly.

Second, those pay ratios we do already have are mostly trending upward — but perhaps not as widely as cynics might expect. Of the 21 firms we examined, 12 have higher pay ratios in 2018, but eight more had lower ratios. (One firm’s ratio held steady.)

Then again, it’s still early. Maybe as more firms file 2018 pay ratios, the balance will skew higher and the cynics will be vindicated. We don’t know yet. Table 1, below, shows the five firms with the largest 2018 pay ratios so far.

An important point to consider here is *why* pay ratios might be fluctuating. For example, if a CEO receives most of his or her compensation in the form of stock awards, the company’s shares might have done quite well in 2018.

That would certainly enlarge the CEO’s total compensation, and therefore boost his or her pay ratio. But that’s not the same as a Scroogey McScrooge CEO reporting a higher pay ratio because he cut the median employee’s salary while raising his own base pay.

Critics of the CEO Pay Ratio Rule — and don’t die of shock here, but many CEOs do dislike this rule — say the number can be confusing, or even misleading. They’re not wrong; it *can* be misleading, if financial analysts don’t understand where the numbers in the ratio come from and how those numbers fluctuate from year to year.

Calcbench subscribers can do this by using our Trace feature to see how a CEO pay ratio was calculated. The trace will whisk you back to the proxy statement and the underlying data.

For example, American Electric Power ($AEP) reported a 2018 pay ratio of 111. That comes from CEO Nick Akins’ total compensation of $12.2 million last year, compared to the median employee compensation of $110,125.

You could also then compare that against AEP’s disclosure from 2017, when the pay ratio was 102 — stemming from $11.5 million in CEO compensation, against $113,085 for the median employee.

Now, you might ask: where did those changes in Akins’ compensation come from? Jump to AEP’s summary compensation tables, and you can find the answer. Akins did get a raise in base salary of $40,00o to $1.415 million, and he also got a much larger incentive bonus: $2.9 million, compared to $1.7 million last year. His stock awards, pension contributions, and other compensation, however, actually fell.

Searching standardized metrics, tracing back to the source disclosure, comparing to previous periods; that’s how you can do better financial analysis. Calcbench lets you do it with just a few keystrokes.