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July 23, 2013 at 07:28 AM
The Securities and Exchange Commission is expected to propose regulation this summer that would finally require publicly traded companies to disclose the gap between CEO salaries and the median pay rate of its workers.
Initially included in the 2010 Dodd-Frank Act, the SEC will likely vote on the issue in August. Should the SEC decide to put the rule into effect, several months of public comment would be expected before a final vote.
The rule would require reporting CEO compensation as a multiple of median-worker pay. An April 2013 study by Bloomberg examined Standard & Poor’s 500 Index top 250 companies and found the average multiple of CEO pay was 204, up 20 percent from 2009. Although most companies don’t disclose worker pay, the Bloomberg study used DOL industry data on worker compensation.
Those supporting the regulation believe the CEO/worker multiplier would serve shareholders by shedding light on worker satisfaction and monitoring CEO pay. Investment activists and large workers’ unions support SEC follow-through on this ruling.
The opposing camp claims pulling together the data would be expensive and time-consuming. Adding costs to business is a question the SEC most consider before proposing its rules.
