WASHINGTON – A divided Securities and Exchange Commission proposed Wednesday that public companies disclose how much more their chief executives earn than rank-and-file workers.
SEC commissioners voted 3 to 2 to propose and seek comment on a requirement opposed by the agencys two Republican members and more than 20 large business lobbying groups, which say the data will be costly to compile and wont help investors.
The disclosure rule, championed by unions and some congressional Democrats, must be issued under the 2010 Dodd-Frank law.
In an attempt to make compliance less costly for companies, the SEC proposed that businesses can use sampling and estimation methods to determine the median pay of workers, according to a summary of the plan issued Wednesday.
The plan doesnt allow companies to exclude part-time workers or employees based in foreign countries from the calculation.
The staff has drafted and recommended a proposal that would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate, SEC Chairman Mary Jo White said.
Sen. Robert Menendez, a New Jersey Democrat who wrote the Dodd-Frank provision requiring the disclosure, had warned the SEC against exempting non-U.S. employees and part-time workers.
When I wrote all employees of an issuer, I really did mean all employees of an issuer, Menendez wrote in a letter to the SEC shortly after the law was passed and lobbying began to shape the rule.
The law requires public companies to disclose their CEOs total compensation as a multiple of median total worker pay.
The law says total compensation includes salary, bonus, stock and option awards, long-term incentive pay, and change in pension value.
Menendez has said he wrote the provision to ensure that investors know whether a companys 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.