The US Securities and Exchange Commission has adopted a final rule requiring public companies to disclose the ratio of the compensation of chief executive officers (CEOs) to the median pay of employees. The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will provide shareholders with information to evaluate a CEO’s compensation package, and will require disclosure of the pay ratio in a range of public reporting, including registration statements, proxy and information statements and many annual reports.
However, human resources association WorldatWork, which consistently opposed the pay ratio reporting requirement as it moved through the legislative process, is ‘incredibly disappointed’ with the decision to implement the rule.
WorldatWork vice-president Cara Woodson Welch said:
‘We feel the final version has no benefits and requires companies to account for all employees, including overseas workers with very limited exceptions. Now our members will be forced to comply with costly and time-consuming regulations to calculate the pay-ratio for all company employees regardless if they are full-time, part-time or seasonal workers . . . There are many other requirements that are more beneficial to investors and less burdensome on employers that the commission should be addressing. The new reporting requirement, in particular determining the median annual total compensation for all employees, will significantly restrict the work of compensation professionals and employers and will not enhance transparency or provide any known benefit to shareholders or potential investors.’