The nonprofit HR organization WorldatWork has urged the Securities and Exchange Commission (SEC) to reject proposed regulations that would require corporations to report the ratio of CEO pay to that of median employee pay.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires publicly traded companies to disclose the ratio.
A WorldatWork statement said the reporting requirement “will be significantly burdensome to compensation professionals and employers and will not enhance transparency or provide any known benefit to shareholders or potential investors.”
WorldatWork represents HR professionals focused on compensation and total-rewards issues.
The problem with the proposed CEO pay-ratio reporting rule: An overly expansive definition of “employees,” which would require companies to include temporary, seasonal, part-time and non-U.S. employees in the calculation of median annual total compensation.
“If the SEC does move forward with finalizing these rules, WorldatWork urges the SEC to revise the reporting requirement so that the pool of employees will be limited to full-time, U.S.-based workers,” the statement said.
According to the Aon-Hewitt HR consulting firm, the difference matters. In one large corporation the firm analyzed, the CEO pay ratio could run as high as 1,531:1 using the broader definition of employee. Narrowing it to full-time U.S. employees only brings the ratio down to just 967:1.
Whatever form the final rules take, they will go into effect in 2016, using 2015 pay rates, which most corporations will set in 2014.