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Katayun I. Jaffari and Jessica DuBois of Ballard Spahr Katayun I. Jaffari and Jessica DuBois of Ballard Spahr

It was two years ago that the Securities Exchange Commission (SEC) issued guidance that implemented the pay ratio disclosure requirement promulgated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). Under the Dodd-Frank Act and the SEC guidance, companies are required to disclose, as a ratio, a comparison of the annual total compensation of the chief executive officer (CEO) and that of the company’s “median” employee. Public companies voiced their concerns as to how to calculate the ratio leading up to the effectiveness of the disclosure requirement. The SEC responded with its guidance by relaxing certain aspects of the disclosure rule. It has now been two years since the disclosure requirement has been effective. Many have suggested that the result of the pay ratio disclosure is data that is both difficult to compare across companies and not helpful to shareholders in determining whether employees are fairly compensated.

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