On August 5, 2015, the Securities and Exchange Commission adopted final rules (the "Final Rules") by a vote of three to two to require disclosure of (i) the median of the annual total compensation of all of the company’s employees (excluding the CEO or equivalent position); (ii) the annual total compensation of the CEO or equivalent position; and (iii) the ratio of the two amounts.
The Final Rules are substantially similar to the proposed rules released in September 2013. The Final Rules incorporate certain modifications based on comments to the proposed rules largely aimed at reducing the costs of compliance.
The new pay ratio disclosure will be required in annual reports or proxy statements beginning in the spring of 2018, covering compensation for the fiscal year on or after January 1, 2017, with transition periods for newly public companies. Foreign private issuers, emerging growth companies and smaller reporting companies are exempt from the pay ratio disclosure requirements.
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