Beginning Next Week: InsideCounsel will become part of Corporate Counsel. Bringing these two industry-leading websites together will now give you comprehensive coverage of the full spectrum of issues affecting today's General Counsel at companies of all sizes. You will continue to receive expert analysis on key issues including corporate litigation, labor developments, tech initiatives and intellectual property, as well as Women, Influence & Power in Law (WIPL) professional development content. Plus we'll be serving all ALM legal publications from one interconnected platform, powered by Law.com, giving you easy access to additional relevant content from other InsideCounsel sister publications.

To prevent a disruption in service, you will be automatically redirected to the new site next week. Thank you for being a valued InsideCounsel reader!

X

SEC proposes new rule on CEO pay disclosure

Companies may have to disclose the difference in CEO compensation and other employees

A new proposed rule may have companies pulling out their calculators and crunching some numbers.

On Wednesday, regulators proposed the rule that will require public companies to make CEO compensation more transparent—and it’s drawing some controversy. The proposed rule was originally proposed in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and it mandates that public companies to report the wage gap between their CEOs and rank-and-file employees.

Yesterday, three of the five members of the SEC voted in favor of the proposal. The commission wants companies to provide two more data points in their filings: median of the total compensation for all employees excluding the CEO, and the ratio between that number and the CEO’s annual total compensation.

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

While those in favor of the proposed rule laud the transparency it brings to investors, critics complain it goes too far, saying it’s too complex, time-consuming and expensive.

Since the financial crisis started in 2008, executive compensation has come under intense scrutiny, and for good reason. According to the Economic Policy Institute, Executive compensation is now more than 277 times an average worker’s pay compared with just 20 times in 1965.

“Clearly we have a steep uptrend,” SEC Commissioner Luis A. Aguilar told the New York Times DealBook.

Editor

Cathleen Flahardy

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.