SEC Proposes Pay Ratio Disclosure Rules

    View Authors September 2013
    On September 18, 2013, the Securities and Exchange Commission voted 3-2 to propose amendments to the executive compensation disclosure rules to implement the controversial “pay ratio” disclosure requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed rules would require US public companies to disclose (i) the median of the annual total compensation of all employees (except the chief executive officer), (ii) the annual total compensation of the chief executive officer and (iii) the ratio of the median of the annual total compensation of all employees to the annual total compensation of the chief executive officer. The proposed rules provide flexibility to select the method for determining the median-compensated employee, permit the use of statistical sampling or other reasonable methods in that determination and broadly define the group of employees to be considered. The transition guidance notes that if final rules become effective in 2014, the first pay ratio disclosures for companies with December 31 fiscal year ends would relate to 2015 compensation and be provided in 2016. This publication provides highlights of the proposed rules and release.