S.E.C. Approves Rule on C.E.O. Pay Ratio

By PETER EAVIS AUG. 5, 2015



Mary Jo White, the chairwoman of the S.E.C., voted in favor of the rule on C.E.O. pay. CreditJonathan Ernst/Reuters


After a long delay and plenty of pushback from corporate America, the Securities and Exchange Commission approved on Wednesday a rule that would require most public companies to regularly reveal the gap between the compensation of the chief executive and the pay of the rest of their employees.

The rule, which stems from the 2010 Dodd-Frank overhaul of financial regulation, gives companies considerable flexibility in calculating the pay gap, suggesting that the S.E.C. was receptive to concerns about cost and complexity that corporations expressed.

Still, the data point, which calculates the ratio of a chief executive’s compensation to the median compensation of a company’s employees, could further stoke the debate over income inequality that has intensified in recent months. Fifty years ago, chief executives were paid roughly 20 times as much as their employees, compared with nearly 300 times in 2013, according to an analysis last year by the Economic Policy Institute.

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The rule was conceived to help shareholders assess the compensation packages of senior executives. The ratio, for instance, could provide a benchmark for comparing the pay of chief executives at companies in similar industries.

The rule starts to take effect in 2017, which means that companies will most likely start reporting the ratio in public financial statements that come out in 2018. The rule passed by three votes to two, with the S.E.C.’s two Republican commissioners voting against it.

Mary Jo White, the chairwoman of the S.E.C., who voted in favor of the rule, said the agency’s staff had written a thoughtful rule that honored the intent of Congress when it passed the Dodd-Frank Act.

“I want to commend the staff for all of their exceptional and extensive work to craft a reasonable rule that is both flexible and faithful to the terms and objective of the statute,” she said in a statement.

But some union analysts said that the agency appeared to give up too much ground in the final rule.

“There are definitely weaknesses that we are concerned about,” said Heather Slavkin Corzo, director of investment at the A.F.L.-C.I.O.

http://www.nytimes.com/2015/08/06/bu...pay-ratio.html