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Proposed Rule Would Make Companies Disclose CEO-To-Worker Pay Ratio

Update At 12:30 p.m. ET. SEC Approves Rule:

The Securities and Exchange Commission has voted 3-2 to move the proposed rule ahead, with the two Republican commissioners opposing the measure.

The rule now goes for a 60-day public comment period, after which it could be formally adopted.

SEC commissioners also voted unanimously to require municipal advisers to register with the agency.

Here's our original post:

U.S. corporations would be required to disclose the ratio of their CEO's pay to that of average workers as part of an oversight plan being voted on Wednesday by the Securities and Exchange Commission.

Bloomberg News reports the proposed rule change is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Sen. Robert Menendez (D-N.J.), who wrote the CEO pay-ratio provision, said it was aimed at ensuring "that investors know whether a company's pay practices are 'fair' and whether 'executives are sharing proportionately in any sacrifices.' Other proponents of the rule, including unions, say a lopsided ratio would help investors detect whether a company may have morale problems among its workforce that can affect productivity and earnings."

Last year, CEOs earned 202.3 times more than typical workers, according to the Economic Policy Institute. That figure, the EPI says, is "far higher than it was in the 1960s, 1970s, 1980s, or 1990s." A separate study by the AFL-CIO, citing only the largest U.S. corporations, cited a ratio of 354-to-1, which it said was the widest gap in the world.

CNN reported last year that Apple CEO Tim Cook's salary was more than 6,000 times the average worker, while Berkshire Hathaway's Warren Buffett made just 11 times the company's average pay.

Reuters says the provision has been "vehemently opposed" by "companies and business organizations such as the U.S. Chamber of Commerce, as well as the Center on Executive Compensation." They complain the rule would be too costly and difficult to implement and would not be useful for investors.

According to the news service, the SEC says it "would require companies to include compensation data for all of its workers, including those employed overseas or by its subsidiaries."

It also adds that:

"However, the SEC also said it would give companies more flexibility in how they calculate the median. They could, for instance, use a statistical sample."

Reuters says the CEO pay-ratio regulation is "one of two major outstanding regulations mandated by the 2010 Dodd-Frank Wall Street reform law. ... The agency also is expected to adopt a rule that will allow it to oversee financial advisers to cities, counties and other municipal entities that sell public debt or manage public money."

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Scott Neuman is a reporter and editor, working mainly on breaking news for NPR's digital and radio platforms.
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