On Wednesday, the Securities and Exchange Commission adopted a rule that requires a public company to disclose the ratio of the compensation of its CEO to the median compensation of its employees.
A press release
explains: “The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides companies with flexibility in calculating this pay ratio, and helps inform shareholders when voting on ‘say on pay.'”
But the policy will not go into effect until January 1, 2017, which means companies will likely not have to divulge the ratios
until 2018.
Why was this rule implemented? As the SEC
writes, “to provide shareholders with information they can use to evaluate a CEO’s compensation, and will require disclosure of the pay ratio in registration statements, proxy and information statements, and annual reports that call for executive compensation disclosure.”
The SEC notes the rule does not apply to smaller reporting companies, emerging growth companies, foreign private issuers, MJDS filers, or registered investment companies.
Many major U.S. companies are already known for having a huge ratio. As Mashable
writes, PayScale, a company that specializes in salary and compensation information, lists Walmart as
having by far the biggest difference with CEO Michael Duke making 1,034 times the median work for the retail outlet. Those hovering near the top of the list include Target (591:1), Disney (557:1), McDonald’s (535:1) and Rupert Murdoch’s News Corp (409:1).
This article was originally published on B2B News Network, by David Silverberg. Copyright 2015.
