New CEO Pay Ratio Rule Disclosure Guidance Expected, but No Delay in Sight for the Pay Ratio Rule

At the ABA Annual Meeting on Friday, September 15th, the Securities and Exchange Commission (SEC) Division of Corporation Finance Director Bill Hinman (speaking for himself and not the SEC) said that the SEC did not plan to delay the implementation of the CEO pay ratio disclosure rules. Mr. Hinman also mentioned that the SEC anticipates issuing guidance on the pay ratio rule in the near future.  We note that although the Financial Choice Act that was passed by the House would repeal the pay ratio rule, the lack of bipartisan support will make it extremely difficult to pass through the Senate on a filibuster-proof vote.  Therefore, although it is theoretically possible that Congress could repeal the pay ratio rule, it is highly unlikely that it would pass before the 2018 proxy season.

In light of this development, it is imperative for companies to start developing a process now for identifying their “median employee” in preparation for the 2018 proxy season.

For additional information on preparing for the CEO pay ratio rule, please see our previous blog.

Sinead Kelly is a partner in Baker McKenzie's Compensation practice. She advises on US executive compensation and global equity and has practiced in the compensation field for over 13 years. Sinead advises US and non-US public and private companies on all aspects of equity compensation plans and arrangements, including plan design, administration, and global implementation, as well as compliance with federal and state corporate, securities and tax laws, stock exchange rules, accounting rules, and non-US tax and regulatory requirements. Sinead also advises on the drafting and administration of nonqualified deferred compensation arrangements, director compensation programs, severance arrangements, change in control plans, employment agreements, short and long-term bonus plans, and other executive compensation arrangements.
Victor Flores is a partner in Baker McKenzie’s Employment & Compensation Practice, with a focus on Executive Compensation and Employee Benefits. Victor advises global US and non-US companies – both public and private – on all aspects of executive compensation and benefits matters, including the corporate, securities and tax law, and ERISA issues arising in the implementation and administration of compensation programs. He regularly helps clients with the design and implementation of equity and non-equity based incentive compensation programs and nonqualified deferred compensation programs. Victor also has extensive experience advising on compensations and benefits issues in mergers and acquisitions, corporate reorganizations, private equity and other corporate transactions.