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Does executive compensation need to be more transparent?

Public interest groups meet with the SEC to discuss rules governing executive compensation

Executive compensation has been a controversial topic recently, as reports have shown that the average annual compensation figure for the 200 highest-paid executives in the United States was $20 million. This figured has rankled many, and certain special interest groups have taken it upon themselves to meet with the Securities and Exchange Commission (SEC) to discuss rules regarding executive compensation.

According to SEC documents, agency leaders met with representatives from labor unions and other groups the first week in July. The meetings concerned subsections of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act and dealt with transparency of executive compensation and how that compares to salaries of workers. 

The unions, accompanied by other public interest groups, spoke to SEC regulators, expressing their belief that such disclosures will have a large impact on employee morale, loyalty and performance. Opponents of the rule believe it is burdensome and will have no impact on investors.

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Also controversial is the method of determining the median income of employees. The proposed rule includes part-time and non-U.S. workers, but business lobbyists believe that only full-time, U.S. workers should be included in the calculation. 

The author of the pay-ration provision, Senator Robert Menendez (D.-NJ) has continued to urge the SEC to implement the provision as quickly as possible, though regulators have met several times on the matter with little visible progress. 

The pay ratio rule is just one of the regulatory matters the SEC must finalize by October. Other matters, like incentive-based pay for bankers, are also a high priority for the SEC. Whether or not big businesses like the pay-ratio rule, it is likely to go into effect in one form or another by the end of the year.

 

Senior Editor

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Rich Steeves

Richard P. Steeves is Senior Editor of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A. in English Literature...

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