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Preparing for the new CEO pay ratio disclosure requirement

Published on: Oct 04, 2016

In 2015, the Securities and Exchange Commission (SEC) issued a final rule requiring disclosure of the ratio of chief executive officer (CEO) pay to that of the median employee under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The disclosure is required for the first fiscal year beginning on or after January 1, 2017, and as such, calendar-year companies will have to provide the ratio beginning with their 2018 annual proxy statement, based on 2017 compensation data. Despite this timeline, it is advisable that management consider providing the Compensation Committee with a preliminary assessment early in 2017, allowing the Committee sufficient time to understand the ratio and the underlying calculation, giving management time to develop its communication strategy (both internal and external).


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