SEC Issues Pay Ratio Guidance

Item 402(u) of Regulation S-K was adopted in 2015 to implement the pay ratio disclosure provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and will require pay ratio disclosure with respect to the first fiscal year beginning on or after January 1, 2017 (i.e., such disclosure will be required during the 2018 proxy season).¹ The required disclosures consist of the total compensation of the registrant's principal executive officer, the median total compensation of the registrant's employees other than its principal executive officer, and the ratio of the first of these amounts to the second.

One major concern expressed by larger registrants, particularly those with extensive foreign operations, has been the difficulty of identifying the median employee whose total compensation needs to be disclosed. The SEC attempted to address some of those concerns when it adopted Item 402(u), and on September 21, 2017, published interpretive guidance concerni