SEC Proposes Pay Ratio Disclosure Rule in Compliance with Dodd-Frank Act
On September 18, 2013, the Securities and Exchange Commission (“SEC”) voted to propose a new rule that would require public companies to state pay ratio disclosure of the compensation of its chief executive officer (“CEO”) to the median compensation of its employees.
In recent years, there’s been a great deal of discussion among Wall Street observers about the extremely high salaries and benefits paid to some CEOs and other high-ranking company officials.
Many feel that this compensation, often in the millions, and sometimes in the tens of millions of dollars, is excessive and inappropriate, especially when ordinary employees are being paid far less.
The new rule is required by the Dodd-Frank Act. The disclosure mandated would be:
● The median of the annual total compensation of all of the company’s employees except for the CEO.
● The annual total compensation of the CEO.
● The ratio of the two amounts.
“All employees” would include full-time, part-time, temporary, seasonal and non-U.S. employees, and those employed by the company or any of its subsidiaries. The calculations would be made as of the last day of the company’s prior fiscal year. Registrants would be obliged to disclose their methodology. They would be free to introduce a narrative discussion of the material presented, but would not be required to do so.
Companies would be able to tailor the methodology used for their disclosures according to their own circumstances.
The new rule would not apply to emerging growth companies as defined by the JOBS Act, to smaller reporting companies or to foreign issuers.
The proposal will be subject to a 60-day public comment period.
SEC Chairman Mary Jo White commented, “This proposal would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate. We are very interested in receiving comments on the proposed approach and the flexibility it affords.”
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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