SEC approves CEO pay-ratio rule

Disclosures were the subject of a heated debate.

The SEC approved a new rule requiring U.S. public companies to disclose the ratio between their CEO's compensation and that of their median employee.

The rule, passed in a 3—2 vote, implements Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, some five years after the law was passed. Companies will now be required to reveal the following:

  • The median of the total annual compensation of all their employees except the CEO.
  • The annual total compensation of the CEO.
  • The ratio of the two amounts.

The pay-ratio proposal generated what SEC Chair Mary Jo White called "a contentious and, at times, heated dialogue."

Debate over the pay-ratio requirement intensified after the SEC proposed the new rule in 2013. Proponents of the changes argued that knowledge of the CEO-employee pay ratio would provide investors with information helpful in making investment decisions and exercising their shareholder rights, especially in cases where they have a say on executive pay. Opponents of the measure countered that the disclosures would add no information of value and that they would be expensive to implement.

SPONSORED REPORT

Keeping client information safe in an age of scams and security threats

A look at the Dirty Dozen tax scams and ways to protect taxpayer information.

TAX PRACTICE CORNER

More R&D tax help

"Can I use the R&D credit?" PATH Act enhancements make the credit more attractive to a wider range of taxpayers.

QUIZ

News quiz: Tax-related data breach explained

News about a data breach that affected about 100,000 people, the IRS’s budget for the fiscal year, and the 2018 health spending account limits received attention recently. See how much you know with this short quiz.