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Did some companies fudge their pay ratio disclosures?

Joe Mont | April 4, 2018

As the initial batch of disclosures to meet requirements of the Securities and Exchange Commission’s pay ratio rule trickle in, activists are already flagging concerns.

The rule, Section 953(b) of the Dodd-Frank Act, requires that CEO pay be represented in comparison to that of the company’s median employee.

“Very similar companies are reporting dramatically different compensation numbers, pay ratios and median salaries to the SEC, and there does not appear to be any explanation for the discrepancies,” claims Public Citizen in a letter to the agency this week.

To implement the rule, the SEC “has provided generous latitude” when firms identify the median paid employee, the letter says. Sampling and reasonable estimates are permitted. The SEC notes that these and other compliance accommodations mean that the disclosure “may involve a degree of imprecision.”

“Acknowledging latitude, we are concerned that the SEC may regard this disclosure without adequate...

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