Disclosure of CEO-to-worker pay may be soon

The Securities and Exchange Commission is expected to propose regulation this summer that would finally require publicly traded companies to disclose the gap between CEO salaries and the median pay rate of its workers.

Initially included in the 2010 Dodd-Frank Act, the SEC will likely vote on the issue in August. Should the SEC decide to put the rule into effect, several months of public comment would be expected before a final vote.

The rule would require reporting CEO compensation as a multiple of median-worker pay. An April 2013 study by Bloomberg examined Standard & Poor’s 500 Index top 250 companies and found the average multiple of CEO pay was 204, up 20 percent from 2009. Although most companies don’t disclose worker pay, the Bloomberg study used DOL industry data on worker compensation.

Those supporting the regulation believe the CEO/worker multiplier would serve shareholders by shedding light on worker satisfaction and monitoring CEO pay. Investment activists and large workers’ unions support SEC follow-through on this ruling.

The opposing camp claims pulling together the data would be expensive and time-consuming. Adding costs to business is a question the SEC most consider before proposing its rules.

Leading opposition includes the U.S. Chamber of Commerce and HR Policy Association, a Washington, D.C., industry group representing HR executive at more than 335 companies.

The House Financial Services Committee voted to repeal this element of Dodd-Frank in June 2013 in a move lauded by the HR Policy group.

“This information is not useful for investors, nor has it been requested or supported by the vast majority of shareholders, as evidenced by the lack of support in shareholder proposals,” wrote Timothy J. Bartl, president of HR Policy’s Center on Executive Compensation. “Proxy disclosures are intended to help investors determine whether a company is a good investment; the pay ratio mandate does not do this. Rather, it is a complicated, expensive distraction that will divert corporate resources from activities that will allow companies to grow in this time of economic recovery.”

The SEC hasn’t yet made its agenda public and is not commenting on the potential regulation. Newly sitting SEC Chairman Mary Jo White told reporters in April she intends to reduce the backlog of rules facing the commission following Dodd-Frank, passed three years ago in a response to Wall Street failures. 

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