The Securities and Exchange Commission (SEC) is moving forward on rules that will require companies to disclose their CEO-to-worker pay ratio. The rule is mandated under the Dodd-Frank Act.
The proposal toward the SEC would specifically amend existing executive compensation disclosure rules to require companies to disclose:
The median of the annual total compensation of all its employees (excluding the CEO);
The annual total compensation of its CEO; and
The ratio of the two amounts.
In good news for companies, the SEC elected not to devise any particular methodology for making the required calculations. Rather, the proposed rules would allow companies to select a methodology that is appropriate to the size and structure of their own businesses and the way they compensate employees.
Of course, there are several specific requirements. For instance, “all employees” means full-time, part-time, temporary, seasonal and non-U.S. employees as well as those employed by subsidiaries. In addition, companies will be required to disclose the methodology employed, and any material assumptions, adjustments or estimates used to determine the median employee or total CEO compensation.
Companies would only be required to provide the new information in filings that must already include executive compensation information under Item 402 of Regulation S-K, such as registration statements, proxy and information statements, and annual reports. The disclosure requirements would not apply to emerging growth companies, smaller reporting companies, and foreign private issuers.
This provision of Dodd-Frank has proven to be controversial, even before the SEC released its rule proposal. In fact, the SEC has already received over 22,000 comments letters on this aspect of Dodd-Frank. Therefore, it could still be some time before any requirements are implemented.
Nonetheless, given the burden of compiling the required information, companies should stay on top of any new developments. We encourage you to check back to this blog for updates.
If you have any questions about the SEC’s proposed compensation rules or would like to discuss the legal issues involved, please contact me, Kenneth Oh, or the Scarinci Hollenbeck attorney with whom you work.
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business
Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1
The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]
How Understanding Bankruptcy Trends Can Benefit Your Business
The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]
SEC Takes Actions Against Issuers for Failure to File Form D
In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
