SEC issues guidance for reporting CEO pay ratios
- The U.S. Securities and Exchange Commission (SEC) released an interpretive guidance on reporting CEO-employee pay ratios. The guidance was issued to help streamline the process of disclosing the ratio of CEO salaries to median employee pay rates.
- The guidance does the following: 1) outlines the SEC's view on employers' use of reasonable estimates, methods, statistics and assumptions in reporting ratios; 2) clarifies which internal documents, such as tax or payroll records, that employers may use to include non-U.S. citizens and to identify median employee wages; and 3) states when employers may use recognized tests to determine whether workers are employees under the rule.
- Nonprofit HR association WorldatWork says it has urged the SEC to delay or repeal the rule, and claims it won't improve transparency or offer any real benefit to shareholders or future investors. The rule is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
A Mercer report released in May shows that 80% of employers struggle to comply with the SEC's CEO-to-worker pay ratio rule. The mandate has caused great confusion among employers over how and when the ratio may be calculated. This guidance seeks to ameliorate some of that.
Republican lawmakers, backed by the Trump administration, tried to repeal Dodd-Frank earlier in the year, but failed to do so. Failure to repeal the act means that employers are still required to abide by the rule.
With the latest GOP's attempt to repeal the Affordable Care Act having failed — at least for now — and its members wanting to move on to the budget proposal and tax reform, repealing Dodd-Frank is temporarily on hold. Meanwhile, Willis Towers Watson has a 6-point plan to help employers comply with the SEC's rule.
- U.S. Securities and Exchange Commission SEC Interpretation
- WorldatWork SEC Releases Interpretative Guidance on Pay Ratio Rule
- HR Dive Willis Towers Watson offers SEC 6 steps for figuring CEO-to-worker pay ratio