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SEC Adopts CEO Pay Ratio Rule

The SEC recently adopted a controversial new rule that requires a public company to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees.

On August 5, 2015, the SEC adopted a final rule, commonly referred to as the “pay ratio rule,” requiring public companies to disclose the following items:

  • The median of the annual total compensation of all employees of a company, other than its chief executive officer (“CEO”);
  • The annual total compensation of the company’s CEO; and
  • The ratio of the annual total compensation of the company’s “median employee” to the CEO’s annual total compensation.

This new rule, which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, is intended to assist shareholders in evaluating companies’ executive compensation practices, including when voting on “say on pay.”  The firm's full Client Alert can be found here.

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