A Divided SEC Proposes CEO Pay Ratio Disclosure Rules

On September 18, 2013, a divided SEC voted 3-2 to propose rules requiring U.S. public companies to disclose the ratio of the annual total compensation of the CEO to the median annual total compensation of all employees, better known as "pay ratio" disclosure.¹ The Staff considered nearly 23,000 comment letters prior to issuing the proposal, and has included in the proposal many additional requests for public comment. There is a 60-day public comment period after publication in the federal register.

It is generally expected that final rules will not be adopted until 2014 and will not be effective until 2015. This means that a company with a December 31 fiscal year end must include pay ratio disclosure for fiscal year 2015 in its proxy statement for the 2016 annual meeting of stockholders. The new rules will not apply to foreign private issuers, MJDS filers, emerging growth companies or smaller reporting companies. Newly public companies that do not fit into one of