SEC may approve CEO pay disclosure rule

Rule requires companies to report wage gap between CEOs and other employees

It’s been long in the making, but it looks like a new rule, originally proposed in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may finally take affect.

Next month, the Securities and Exchange Commission (SEC) is expected to approve a rule that will require public companies to report the wage gap between their CEOs and rank-and-file employees, according to recent report from The Wall Street Journal.

The purpose of the law is two fold, according to industry experts: 1) It will likely put pressure on companies to slow the pay increases of their CEOs and; 2) it will give shareholders a more transparent view of their investment.

“The more information shareholders have about compensation the better they can understand what they are getting on their investment,” Mark Williams, a former Fed Reserve Bank examiner and now a teacher a Boston University, recently told Forbes.

The new rule, which the SEC is likely to approve early next month, is less onerous than previously proposed under Dodd-Frank. Rather than requiring companies to survey its entire workforce, the expected law will only require companies to survey a sample of its employees to calculate median pay, WSJ reported. The law also requires companies to publish the results.

Critics of the rule, which include large corporations and republican lawmakers, claim the requirement will be costly and burdensome on companies. While republicans on the five-member SEC have signaled they may not back the proposed rule, the SEC’s two democrats, as well as independent Chairman Mary Jo White, are likely to support it, the WSJ reported.

Read more about this story on WSJ and Forbes.

Read more stories related to Dodd-Frank on InsideCounsel:

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Contributing Author

Cathleen Flahardy

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