A Five-Minute Guide to Pay Ratio Disclosures

Today, the SEC issued its final ruling on pay ratio disclosure. Most public companies will need to regularly report the total annual compensation ratio of the CEO to the median employee (“CEO pay ratio”). This is a requirement of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but Congress left the details of implementing it up to the SEC.

In the August issue of workspan (login required), we argue that companies should approach this requirement as an opportunity to add narrative and supplementary numerical color to their disclosures. After all, in the absence of information, people will draw their own conclusions. We wrote this article before the SEC finalized the required pay ratio disclosure rules, and expect to continue publishing on this timely topic in the months ahead.

A silver lining is that the required disclosure will take effect in fiscal year 2017 proxies. This is a year later than we predicted when we wrote our article. Nevertheless, we’re already starting to run pro forma analyses to help companies understand their ratio and the drivers behind it.

You can read the workspan article here.

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