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.
- Practices: Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, 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
SPACs Are Back, What You Need to Know
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Author: Dan Brecher
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Author: Dan Brecher
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Author: Brian D. Spector
Common Causes of Partnership Disputes and How to Resolve Them
Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]
Author: Christopher D. Warren
Businesses Are Facing Financial Headwinds—A Practical Guide
*** The original article was featured on Bloomberg Tax, April 28, 2025 — As a tax attorney who spends much of my time helping people and companies who have large, unresolved issues with the IRS or one or more state tax departments, it often occurs to me that the best service that I can provide […]
Author: Scott H. Novak
President Trump's Termination of Member Gwynne Wilcox
On January 28, 2025, the Trump Administration terminated Gwynne Wilcox from her position as a Member of the National Labor Relations Board (NLRB or the Board). Gwynne Wilcox, a union side lawyer for Levy Ratner, was confirmed to the Board for an original term in 2021 and confirmed again for a successive five-year term expiring […]
Author: Matthew F. Mimnaugh
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.