Finding the Silver Lining in the New CEO Pay-Ratio Disclosure Rules

Silver Lining

Posted by Michael Kesner on October 23, 2013

Tucked inside 2010’s Dodd-Frank legislation is the requirement for the SEC to implement rules requiring public companies to disclose the ratio of their median employee’s compensation to the CEO’s compensation. The SEC proposed the new rules on September 18, 2013, subject to a 60-day public comment period after the rule is published in the Federal Register. Once finalized, the rules will take effect the following compensation year. So, depending on the effective date, companies will have to start reporting the ratio in 2015 or 2016. (Also depending on the effective date, companies following a fiscal year calendar may be subject to reporting before their calendar year counterparts.) While this may sound too far away to worry about today, calculating the ratios will be no small feat — and will likely come with a substantial “headache factor.” Companies would be wise to prepare sooner rather than later.

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