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Counsel to reporting companies should carefully consider the SEC’s proposed pay ratio disclosure rule, because it may significantly increase your company’s compliance costs and may require substantial time and resources to configure your data retrieval systems in a way to optimize your eventual reporting obligations. On Sept. 18, 2013, the Commissioners of the SEC voted 3−2 along party lines to propose new regulations mandated by Section 953(b) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that requires certain U.S. public companies to disclose the median of the total annual compensation of all its employees (excluding the company’s principal executive officer or PEO) and the ratio of that median to the total annual compensation of its PEO. The proposed rule is controversial for a number of reasons, as evidenced by the newest commissioner of the SEC who stated, “[The SEC] should not be spending money and limited resources on any rulemaking that unambiguously harms investors, negatively affects competition, promotes inefficiencies and restricts capital formation.”

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