Pay Ratio Disclosure Rule Likely to Remain in Effect for the 2018 Proxy Season

August 18, 2017

Despite optimism during the early days of the Trump administration that the SEC’s pay ratio disclosure rule was on the chopping block, the bitter reality is settling in: it is likely that most public companies will be required to include CEO pay ratio disclosure in their 2018 proxy statements.

In February 2017, then-Acting SEC Chairman Michael Piwowar launched a 45-day request for comment on the pay ratio rule, seeking input from companies about “any unexpected challenges” that they may have experienced in preparing to comply with the rule. Mr. Piwowar also directed the 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.”

To date, the SEC has offered no such additional guidance or relief. Moreover, a delay of the rule is unlikely since there are not enough SEC Commissioners in place to constitute a meeting quorum. SEC rules require three Commissioners to constitute a quorum, and there are currently only three Commissioners in office (with two vacancies subject to Presidential nomination and Congressional approval).

While Chairman Jay Clayton and Mr. Piwowar are sympathetic to the rule’s opponents, it is likely that Commissioner Kara Stein, a Democrat, would refuse to attend a meeting where delay of the rule was on the agenda. Accordingly, we recommend preparing now for compliance with this complicated rule.

For a summary of the pay ratio rule and SEC guidance, see this previous Ticker report.

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