Newspaper article St Louis Post-Dispatch (MO)

SEC Requires Companies to Reveal CEO-vs-Worker Pay Gap

Newspaper article St Louis Post-Dispatch (MO)

SEC Requires Companies to Reveal CEO-vs-Worker Pay Gap

Article excerpt

WASHINGTON * Federal regulators have approved a long-delayed rule requiring companies to reveal the pay gap between CEOs and their employees.

The Securities and Exchange Commission voted Wednesday to order most public companies to disclose the ratio between their chief executives' annual compensation and median, or midpoint, employee pay.

The 3-2 vote, with the two Republican commissioners dissenting, culminated years of heated public debate over one of the most controversial rules the agency has put forward in recent years. The SEC received more than 280,000 comments on the issue since it floated the proposal two years ago, and lobbying by business interests against the requirement was intense.

The SEC acted under a mandate from the 2010 law that reshaped regulation after the financial crisis. Outsize pay packages often tied to the company's stock price were blamed for encouraging disastrous risk-taking and short-term gain at the expense of long- term performance.

Public reporting of the gap is unlikely to result in a rush to cut executives' pay packages or boost employee salaries. The numbers could pack a symbolic punch, though, and nudge company directors as watchdogs to push back on executives' excess, supporters of disclosure say. The information also could be useful to shareholders casting advisory votes on executives' pay packages, which they've been entitled to do since 2011.

Companies will be required to report the ratio in their annual financial reports for their first fiscal year starting on or after Jan. 1, 2017.

Taking into account objections by business groups, the SEC built some flexibility and exceptions into the ratio requirement.

For example, companies can use estimates or sampling to determine the median employee pay.

Smaller public companies those with less than $75 million in total shares held externally or less than $50 million in annual revenue are exempt from the disclosure. …

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