SEC Adopts Pay Ratio Rule

On August 5, 2015, the SEC adopted the pay ratio disclosure rule,¹ as required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This new rule comes more than five years after Dodd-Frank was enacted and after thousands of comment letters from companies, trade groups, unions, and investors. The rule was adopted over strong dissent from two of the five Commissioners. Backed by special interest groups, the rule does little more than attempt to shame corporate America while providing no meaningful benefit to investors.

Under the rule, public companies will be required to disclose, in any proxy statement, registration statement, or other filing that requires executive compensation disclosure, the total compensation of its CEO, the median compensation of its employees, and the ratio between those two amounts.^2,3 The rule applies to executive compensation disclosures for fiscal years that start on or after January 1, 2017. The rule does not