SEC Issues Proposal to Implement Dodd-Frank CEO Pay Ratio Disclosure Requirement

On September 18, the SEC proposed the adoption of new Item 402(u) of Regulation S-K to require public companies to disclose the ratio of their CEO’s total compensation to the median annual total compensation of all other company employees. The new disclosure requirement is mandated by Section 953(b) of the Dodd-Frank Act and was announced in Release No. 33-9452, which can be viewed here. Emerging growth companies, smaller reporting companies and foreign private issuers would be exempt from the disclosure requirement. A company subject to the new requirement would first be required to disclose the CEO pay ratio for its first fiscal year beginning on or after the effective date of new Item 402(u). Accordingly, if the SEC adopts the pay ratio proposal in 2014, calendar-year companies would not be required to provide the new disclosure until 2016, in their annual report on Form 10-K for 2015 and their 2016 annual meeting proxy statement.

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