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US SEC: Comments sought on pay ratio disclosure rule

The US Securities and Exchange Commission (SEC) is seeking comments from companies are encountering as they look to comply with the CEO Pay Ratio disclosure rule which took effect for financial years from 1st January 2017. The rule, hotly debated by business and investors alike, requests companies to disclose the ratio of the median of the annual total pay of all employees to the annual total pay of the chief executive.

The SEC adopted the pay ratio disclosure rule in August 2015 as part of its implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. However it had already delayed compliance until this year based on the comments it had received during the rulemaking process.

US SEC pay ratio disclosure rule

SEC Chair Michael Piwowar: Seeking comments on the pay ratio disclosure rule

In a statement on its  website (6th February) acting SEC chairman Michael Piwowar said: “Issuers are now actively engaged in the implementation and testing of systems and controls designed to collect and process the information necessary for compliance. However, it is my understanding that some issuers have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline.”

In order to better understand the nature of these difficulties, Piwowar said he was seeking comments on any unexpected challenges that issuers has experienced as they prepare for compliance with the rule and whether action to support them was needed. He said he would welcome and encourage the submission of detailed comments, which should be submitted within the next 45 days.

He said that he had directed SEC staff to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.

Piwowar  added: “I understand that issuers need to be informed of any further Commission or staff action as soon as possible in order to plan and adjust their implementation processes accordingly. I encourage commenters and the staff to expedite their review in light of these unique circumstances.”

The Dodd-Frank legislation, passed in the wake of the 2008 financial crisis is now under review following an executive order signed earlier this month by the US President Trump. He, and Republican members of Congress, are known to believe that aspects of the law place too high a burden on banks and other companies and is damaging to the US economy.

What do you think?