U.S. SEC adopts rules mandating disclosure of CEO-worker pay ratios

Wed Aug 5, 2015 2:04pm EDT
 
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By Sarah N. Lynch

WASHINGTON (Reuters) - Companies will have to provide investors with a ratio showing how the median pay of their workforce squares with their chief executive officers' compensation, according to new rules adopted by U.S. securities regulators on Wednesday.

Under the Securities and Exchange Commission's final rules, companies will get some flexibility in how they find the median. For instance, they can exclude 5 percent of their overseas workers when arriving at the number and use statistical sampling.

In addition, only larger and mid-sized companies will need to comply, while smaller ones are exempt.

However, those changes did not assuage corporate trade groups, which have opposed any rule and are widely expected to file a legal challenge.

The SEC has been under mounting pressure by Democrats, like Massachusetts Senator Elizabeth Warren and unions such as the AFL-CIO, who support the rule and have lamented delays in its adoption.

The measure was tucked into the 2010 Dodd-Frank law amid concerns about the growing disparity between compensation for chief executives and their corporate workers.

"Pay ratio disclosure should provide a valuable piece of information to investors," said Democratic Commissioner Kara Stein said.

Republicans and trade groups like the U.S. Chamber of Commerce have fought back against the measure at every turn, saying it will be too expensive, could mislead investors and is not material to a company's financial statements.   Continued...

 
U.S. Securities and Exchange Commission Chair Mary Jo White testifies about Wall Street reform before a Senate Banking Committee hearing on Capitol Hill in Washington September 9, 2014. REUTERS/Jonathan Ernst