As Seen in CFO Studio Magazine Q4 2015 Issue
In a hotly contested ballot back in August, the SEC passed new rules requiring publicly held companies to disclose the ratio of their chief executives’ pay to that of the company’s median wage earner. As reported in The Economist, the regulations, which are tied to the Dodd-Frank Act of 2010, are set to take effect in 2017.
Critics argue that the new reporting rules are nothing more than a shaming tactic lobbied for by special interest groups like the AFL-CIO. SEC commissioners supporting the rule feel it will give valuable insight into a company’s governance and fiscal health. Those analyzing the new mandate acknowledge there are many loopholes, and say the ratio formula may not give an accurate picture of a company’s pay-scale diversity. Until the first companies begin complying in 2017, the usefulness and necessity of the SEC ruling remains uncertain.