In a split decision, U.S. securities regulators voted Wednesday to propose rules requiring that companies disclose the CEO pay in proportion to average employee pay.
The U.S. Securities and Exchange Commission (SEC) voted 3-2 to propose a new rule that would require public companies to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees.
The new rule does not prescribe a specific methodology for companies to use in calculating a “pay ratio”. Instead, they will have flexibility in making these calculations.
The SEC received more than 20,000 comment letters on the initial proposal of this measure. In introducing the proposal today, SEC chair, Mary Jo White, noted that some commenters expressed support for the provision, saying that it represents important disclosure for investors; while others strongly questioned the need for, and utility of, this type of information to investors, and objected to the potential cost.
“This proposal would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate,” said White. “We are very interested in receiving comments on the proposed approach and the flexibility it affords.”
The proposal will have a 60-day public comment period.