As expected, at an Open Meeting today, the SEC issued proposed rules on the so-called "CEO pay ratio rules" of the Dodd-Frank Act this. To its credit, the SEC recognized that calculating the median of the annual total compensation of all employees of the issuer using the Summary Compensation Table for every employee [Item 402(c)(2)(x)] would be literally impossible for most corporations. The SEC has not yet actually posted the proposed rules on its website. However, based on oral testimony, the SEC's elegant solution to this problem (at least in the proposed rules) is to allow corporation to use a reasonable method, e.g., W-2 reported wages, of determining WHICH employee(s) represent the median of the annual total compensation of all employees, and require the corporation to use the Summary Compensation Table method for calculating that employees total compensation for comparison against the CEO.
More to come, including a link, once the SEC posts the proposed rules on its website.
As we noted previously, the Director of the SEC's Division of Corporation Finance Keith Higgins will discuss these new proposed rules during his remarks to the CompensationStandards.com conference in Washington, DC on September 23. Your blogger also will be making two presentations at this conference, but my remarks may not be quite as widely anticipated as Keith's will be.