SEC Issues Interpretative Guidance On Pay Ratio Rules

The Staff of the Division of Corporation Finance of the Securities and Exchange Commission issued initial interpretative guidance on the pay ratio disclosure rules. The pay ratio rules were mandated by the Dodd Frank Wall Street Reform and Consumer Protection Act and require public companies to determine and disclose the ratio of the compensation of its principle executive officer to the median compensation of its employees. The pay ratio rules are intended to help inform shareholders when voting on "say on pay."

The pay ratio rules, which were adopted in 2015, require reporting companies to begin including disclosure of a pay ratio in filings made in 2018 for fiscal years beginning on or after January 1, 2017. Smaller reporting companies, emerging growth companies, foreign private issuers, MJDS filers and registered investment companies are exempt from the pay ratio rules.