The wait is over. On Aug. 5, the Securities and Exchange Commission will consider whether to adopt a rule requiring public companies to disclose the ratio of the annual total compensation of the chief executive officer to the median of the annual total compensation of the company’s employees.
The rule, a mandate of the Dodd-Frank Act, has lingered in the proposed rule stage since 2013, engendering plenty of controversy. Proponents, many associated with shareholder activists and organized labor, have accused the SEC of foot-dragging. The business community, especially those public companies covered by the rule, have a laundry list of concerns and fears that compliance will be daunting and expensive. A common concern has been the international scope of the rule and how the lack of centralized payroll systems, differences in the cost of living among various countries, and currency exchange rate fluctuations will complicate the calculation. Companies with a large number of part-time, seasonal, and temporary employees also worry that those populations will negatively skew their ratio.
