Corporate > AG Deal Diary > SEC Proposes CEO Pay Ratio Disclosure Rule
19 Sep '13

On September 18, 2013, the SEC commissioners voted 3-2 to propose a new rule that would amend existing executive compensation disclosure rules by requiring public companies to disclose the ratio of a CEO’s annual total compensation and the median total annual compensation of all other employees of the company (including part-time, seasonal, temporary and foreign employees). The proposed rule, which is intended to fulfill a requirement of the Dodd–Frank Act, provides companies with some flexibility in determining the median compensation for employees by permitting the use of estimation and statistical sampling in order to ease the compliance burden. However, the proposal has already sparked controversy, with detractors questioning its utility and bemoaning anticipated compliance burdens and proponents touting the rule as providing meaningful information to shareholders. The comment period on the proposal ends 60 days after the publication of the rule in the Federal Register. Whatever the ultimate outcome, the new rule will not apply until after the 2014 proxy season. The rule also will not apply to smaller reporting companies, emerging growth companies or foreign private issuers.

The SEC Fact Sheet summarizing the proposal can be found here.