Understanding The SEC's Pay Ratio Disclosure Rule And Its Implications

Keywords: pay ratio, disclosure rule, public companies

The US Securities and Exchange Commission (SEC), by a 3 to 2 vote, adopted a pay ratio disclosure rule, requiring public companies to compare the compensation of their chief executive officer to the median compensation of their other employees.¹

The SEC has provided a transition period so that the initial pay ratio disclosure will be required with respect to compensation for a company's first full fiscal year that begins on or after January 1, 2017. Therefore, calendar year-end companies will first be required to include pay ratio disclosure in 2018. However, there is a lot that companies should begin doing in the meantime to prepare.