The Securities and Exchange Commission wants big corporations and get out their calculators to do a little math: A new proposal unveiled today says U.S. companies will have to disclose how exactly chief executive officers’ paychecks compare to those of their regular workers. That’s something the fatcats had complained would be too difficult to do, but it appears the SEC ain’t buying it.
After pressure from lawmakers to have the SEC get the ball rolling on enforcing Section 953(b) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires publicly traded companies to disclose the ratio of CEO pay as a proportion of the median-paid employee at the firm the SEC finally set forth its proposal for the new pay ratio rule which proponents say could help investors decide whether those at the top are earning too much, reports Reuters.
This rule wouldn’t enforce any kind of regulation tying CEO pay to the level of other employees’ pay, but opponents of the measure say the amount of work it would take to even calculate the ratio. And besides, it would open their CEOs to attacks based on their paychecks.
The president of the U.S. Chamber of Commerce’s Center for Capital Markets claimed in the past that “The ratio is not going to be a meaningful way to help investors but will be used as a political tool to attack companies.”
The SEC’s proposal is seeking somewhat of a middle ground here: While it’s requiring companies to include data on how they compensate all of those works, both home and abroad and under subsidiary companies, it will also give companies a bit of leeway on how they calculate the median, by perhaps using a statistical sample.
No matter how they go about figuring out median pay ratios, companies will need to tell investors all about their methods.
“As owners of public companies, shareholders have the right to know whether CEO pay multiples reflect CEO performance,” said SEC Democratic Commissioner Luis Aguilar. “Pay ratio disclosure can provide a valuable new perspective for executive compensation decisions,” he added.