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ARTICLE · 29 SEPTEMBER 2015

CEO Compensation vs. Median Employee Pay: New SEC Rule

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The SEC has adopted a new rule that will require U.S. companies to disclose the ratio of their CEO's compensation to the median compensation of their other employees.

CanadaEmployment and HR
Leslie McCallum
Leslie McCallum
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The SEC has adopted a new rule that will require U.S. companies to disclose the ratio of their CEO's compensation to the median compensation of their other employees.

What You Need To Know

  • Affected issuers. Emerging Growth Companies as well as Canadian MJDS issuers and other foreign private issuers will not be subject to the rule. This contrasts with the SEC's recently proposed executive compensation clawback rules, which would apply to all issuers listed on U.S. stock exchanges.
  • Median pay. A particularly contentious element of the rule is the cost and complexity of calculating median employee compensation. Partly to help contain compliance costs, the SEC is not mandating a methodology for calculating median employee pay. Instead, issuers will be able to adopt a method they believe is reasonable. This may involve, for example, using a statistical sampling of employees instead of the entire employee population and using readily available compensation

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