Abstract
On September 18, 2013, the Securities and Exchange Commission adopted a proposed rule on the CEO pay ratio disclosure mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The core of the proposed rule is deceptively simple: the requirement that public companies disclose the mathematical relationship between CEO total compensation and median employee total compensation. However, the proposed rule raises two fundamental questions: (1) what will investors glean from the CEO pay ratio disclosure; and (2) what is the SEC’s position on the cost benefit of the CEO pay ratio disclosure? The answers to those questions reveal that while the potential value to investors of the CEO pay ratio disclosure is speculative at best, the cost of compliance will be quite real, both in terms of time and resources.
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