SEC Issues Pay Ratio Disclosure Guidance for 2018 Proxy Statements

September 27, 2017

Companies seeking guidance on complying with the pay ratio rule in their 2018 proxy statements now have it in “boatloads.” That is the term used by prominent commentator Broc Romanek of in a blog post describing the SEC’s interpretive guidance and the SEC staff’s additional guidance on pay ratio calculation, both issued on September 21. In the accompanying SEC press release, Chairman Jay Clayton states that the new guidance “reflects the feedback the SEC has received and encourages companies to use the flexibility incorporated in our prior rulemaking to reduce costs of compliance.” Bill Hinman, Director of the Division of Corporation Finance, notes that the additional staff guidance, “which includes examples illustrating how reasonable estimates and statistical methodologies may be used, is intended to assist companies with their compliance efforts and reduce the costs associated with preparing disclosures.”

As discussed in a previous Ticker report, in February 2017, then-Acting SEC Chairman Michael Piwowar expressed concerns about the rule and launched a request for comment. One concern raised in several of the submitted comments was risk of legal uncertainty—such as the risk of liability from estimates, which are by nature imprecise. The SEC’s new interpretive guidance includes an assurance that an estimate will not be subject to SEC action unless it is “made or reaffirmed without a reasonable basis or… provided other than in good faith.” The SEC staff’s additional guidance on calculation begins by assuring companies that they are “permitted to use statistical sampling, other reasonable methods or a combination of statistical sampling and other reasonable methods.” 


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