SEC's New Rule on CEO Pay Ratio (CRS Report for Congress)
| Release Date |
Sept. 16, 2015 |
| Report Number |
LS_2015-09-16_02 |
| Report Type |
Legal Sidebar |
| Authors |
Davis, Christopher M., 1966- |
| Source Agency |
Congressional Research Service |
Summary:
On August 5, 2015, the Securities and Exchange Commission (SEC) approved by a vote of 3-2 a controversial new rule requiring publicly traded companies to disclose the ratio of the annual pay of the chief executive officer (CEO) to the median annual pay of all of the company's employees. The rule was issued pursuant to section 953(b) of the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Prior to the rule, SEC regulations required companies to disclose considerable information about CEO compensation, but not a comparison with median employee compensation. The new rule directs the SEC to amend any existing executive compensation disclosure rules to require companies to disclose: 1. the median of the annual total compensation of all of the company's employees, except for the CEO; 2. the annual total compensation of its CEO; and 3. the ratio of the two amounts. The new rule is to become effective on January 1, 2017.
