SEC Issues Guidance On Pay Ratio Disclosure Rule

On October 18, 2016, the Division of Corporation Finance of the Securities and Exchange Commission issued five new compliance and disclosure interpretations (C&DIs) regarding the pay ratio disclosure rule, which will require a public company to disclose the ratio of the CEO's compensation to the median compensation of its employees. The new C&DIs provide guidance on matters relating to the selection and use of a consistently applied compensation measure, the treatment of furloughed employees, and determining whether a worker that provides services to a company but is employed by an unaffiliated third party (or by him or herself) will be treated as an employee for purposes of the pay ratio determination. These C&DIs should assist companies that are currently preparing for compliance with the pay ratio disclosure rule.