Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comKey Contacts
Back
The Democrat appointees to the Securities and Exchange Commission (SEC), by a 3-2 majority vote, recently finalized the SEC’s controversial pay ratio rule.
Mandated under the Dodd-Frank Act, the new disclosures will require companies to reveal how their chief executive officers’ compensation compares to their workforce at large.
The SEC pay ratio rule attracted more than 280,000 public comments. Supporters of the new rule maintain that it will discourage reckless compensation packages and help foster economic equality; meanwhile, critics argue that the rule’s recordkeeping obligations are unnecessary and will unduly burden businesses. “To say that the views on the pay ratio disclosure requirement are divided is an obvious understatement,” SEC Mary Jo White stated in advance of the vote, in which the Republican appointees cast the negative votes.
The final rule
The final rule specifically amends 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 response to public comments, the final rule gives businesses some leeway in reporting their CEO pay ratios. However, it does not provide as much flexibility as business groups had requested.
Companies will have some input into how they make the calculations. For instance, the final rule authorizes the use of statistical sampling to define the compensation of an entity’s median employees. Businesses will also be allowed to exclude up to five percent of their non-U.S. employees from their calculations.
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 SEC’s new corporate disclosure requirements would not apply to emerging growth companies, smaller reporting companies, and foreign private issuers.
Companies must begin submitting disclosures in the first fiscal year beginning on or after Jan. 1, 2017. After the initial disclosure, updates are generally required every three years.
- Locations: Red Bank, NJ, New York City, Washington, D.C., Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
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 […]
Author: Brian D. Spector
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. […]
Author: Kenneth C. Oh
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 […]
Author: Matthew F. Mimnaugh
What Are FIRPTA Withholding Requirements?
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 […]
Author: Jesse M. Dimitro
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
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.