- CEO Pay Ratio Disclosure – Time to Prepare
- October 5, 2017 | Authors: Kelly C. Simoneaux; Hope M. Spencer
- Law Firm: Jones Walker LLP - New Orleans Office
The CEO pay ratio disclosure mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") will become effective for most public companies in 2018. Under the final rules adopted by the SEC:
- Issuers must disclose the ratio of the annual total compensation of their CEO to the median of the annual total compensation of their other employees (the "Pay Ratio Rule").
- The pay ratio disclosure is required in compensation disclosures for fiscal years beginning on or after January 1, 2017, and therefore will be included in an issuer's proxy or information statements, or, alternatively, in its annual reports on Form 10-K, beginning in 2018.
- Although the pay ratio must be calculated annually based on the prior year's compensation, an issuer is only required to identify its median employee once every three years, subject to certain limitations.
- Smaller reporting companies, emerging growth companies, and foreign private issuers are exempt from this disclosure requirement.
Continue reading for information on preparing the disclosure and more.