In the wake of three years of intense lobbying, multiple legislative challenges, and a deluge of mostly critical comment letters, the newly proposed rules address some of the concerns that were expressed about the need to contain the cost and complexity of compliance.
The disclosure of pay ratios by public companies is among the multiple new regulatory requirements approved by Congress in the 2010 Dodd-Frank Act. Given expectations for a prolonged formal comment period, followed by further deliberations by the SEC, the new reporting standard is not expected to take effect until at least the 2016 proxy season.
That gives companies opportunity to begin investigating what metrics and processes for arriving at this calculation will be most appropriate and cost-effective for their business. This Client Alert discusses the key provisions and likely ramifications of key elements of the proposed regulations, including:
- Broad Definition of Employee and Issuer
- Flexible Calculation of a “Median Employee”
- Estimated Median Employee Compensation
- Allowed Adjustments
- Limited Exclusions
- Annual Disclosure
Read more commentary on the Pay Ratio Proposal at our Advisor Blog.