The SEC has adopted a final “pay ratio” rule required by Section 953(b) of the Dodd Frank Act. In general, the “pay ratio” rule requires public companies to disclose the median of the annual total compensation of all employees of a registrant (excluding the chief executive officer), the annual total compensation of that registrant’s chief executive officer, and the ratio of the median of the annual total compensation of all employees to the annual total compensation of the chief executive officer.
The disclosure is required in any annual report, proxy or information statement, or registration statement that requires executive compensation disclosure pursuant to Item 402 of Regulation S-K.
The compliance date set forth in the adopting release provides that public companies must report the pay ratio disclosure for the first full fiscal year beginning on or after January 1, 2017. Accordingly, for calendar year end companies, the pay ratio must first be disclosed in the Form 10-K filed in 2018 for the year ended December 31, 2017, or in a later filed proxy statement that is incorporated by reference in the Form 10-K.
The disclosure requirement does not apply to emerging growth companies, smaller reporting companies, or foreign private issuers.
For a comprehensive summary of the final rule, please visit our Dodd-Frank blog (http://dodd-frank.com/).