SEC Proposes Long-Awaited Pay Ratio Rules

On September 18, 2013, in a 3-2 vote of commissioners cast along party lines, the Securities and Exchange Commission (the "SEC") proposed rules to implement Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank").¹ Section 953(b) directs the SEC to promulgate rules to require public companies to disclose the median annual total compensation of all employees other than the chief executive officer ("CEO"), the annual total compensation of the CEO, and the ratio of these two amounts (the "pay ratio rules").² Total compensation is to be calculated in the same manner as in the summary compensation table.³ The proposed pay ratio rules would provide flexibility for registrants to use statistical sampling and estimates to identify median employees and would allow registrants to determine the statistical methodology that is appropriate to their unique circumstances. The SEC reports having received over 20,000 comment letters on