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CEO Pay-Ratio Rule Proposed by SEC

Thursday, September 19th, 2013 Leave a comment

Should a new proposal unveiled by a divided SEC go into effect, public companies will have to disclose how much more their chief executives earn compared to rank-and-file workers. The disclosure rule, championed by unions and some congressional Democrats, is mandated under the 2010 Dodd-Frank law.

Here are further details of the proposal via Bloomberg:

  • In an attempt to make compliance less costly for companies, the SEC proposed that businesses can use sampling and other estimation methods to determine the median pay of workers, the figure to which CEO pay is to be compared. The agency also offered a shortcut that allows companies to estimate median compensation without having to conduct complicated pension-benefit calculations for every worker.
  • The plan doesn’t allow companies to exclude part-time workers or employees based in foreign countries from the calculation. Business groups had complained that it’s technically challenging to reconcile pay practices in other countries with U.S. disclosure rules.

Unsurprisingly, the proposal has attracted significant lobbying efforts in the three years since Dodd-Frank became law. Going forward, the public will now have 60 days to comment on the SEC’s proposed requirements.

Source: CEO-to-Worker PayRatio Disclosure Proposed by Divided SEC (Bloomberg)

See also: A Guide to the SEC’s CEO Pay Rule (WSJ)