SEC Issues Guidance for Pay Ratio Disclosure

November 4, 2016

The SEC recently issued guidance to help companies comply with the pay ratio disclosure rule adopted in August 2015. Companies subject to the rule must report the pay ratio for fiscal years beginning on or after January 1, 2017. This SEC guidance, in the form of five Compliance and Disclosure Interpretations, reiterates the flexibility afforded companies when identifying the median employee for purposes of calculating the ratio. The guidance clarifies, however, that there are strict limits on the ability of companies to annualize pay for purposes of the disclosure. The guidance offers specific examples of measures that would generally not be considered permissible because they do not meet the standards for a consistently applied compensation measure. Read the SEC guidance.

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