If you’re a CEO in the U.S., you will soon have to be upfront about what the view is like high up on the corporate ladder.
On Wednesday, the Securities and Exchange Commission adopted a rule that requires a public company to disclose the ratio of the compensation of its CEO to the median compensation of its employees.
A press release explains: “The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides companies with flexibility in calculating this pay ratio, and helps inform shareholders when voting on ‘say on pay.'”
But the policy will not go into effect until January 1, 2017, which means companies will likely not have to divulge the ratios until 2018.
Why was this rule implemented? As the SEC writes, “to provide shareholders with information they can use to evaluate a CEO’s compensation, and will require disclosure of the pay ratio in registration statements, proxy and information statements, and annual reports that call for executive compensation disclosure.”
The SEC notes the rule does not apply to smaller reporting companies, emerging growth companies, foreign private issuers, MJDS filers, or registered investment companies.
Many major U.S. companies are already known for having an huge ratio. As Mashable writes, PayScale, a company that specializes in salary and compensation information, lists Walmart as having by far the biggest difference with CEO Michael Duke making 1,034 times the median work for the retail outlet. Those hovering near the top of the list include Target (591:1), Disney (557:1), McDonald’s (535:1) and Rupert Murdoch’s News Corp (409:1).
Flickr photo via the White House, showing travel and leisure CEOs with President Barack Obama
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