New guidance delves into pay ratio disclosure dilemmas

To provide further clarification to the simple-sounding, yet ultimately complex requirements of the Securities and Exchange Commission’s pay ratio disclosure rule, its Division of Corporation Finance has released five new Compliance and Disclosure Interpretations. Among the topics are dealing with furloughed employees and certain categories of independent contractors.

In August 2015, the SEC adopted a final rule to satisfy a Dodd-Frank Act requirement that public companies disclose a ratio of the CEO’s total, annual compensation to the corresponding pay of the median employee. The ratio, codified as Item 402(u) of Regulation S-K, becomes effective for the first full fiscal year that begins on or after Jan. 1, 2017. The disclosure must appear in annual meeting proxy statements following the completion of that calendar year.

Among the...