On September 21, the Securities and Exchange Commission (SEC) issued an interpretive release (available here) regarding compliance with Item 402(u) of Regulation S-K (the Pay Ratio Disclosure Rule), which sets forth the requirement that each registrant disclose the ratio of the compensation of its principal executive officer (PEO) to its median employee’s compensation. In the interpretive release, the SEC emphasized that the Pay Ratio Disclosure Rule is designed to provide registrants with the flexibility to determine appropriate methodologies to identify and calculate the compensation of the median employee and prepare the required disclosures. Significantly, the SEC indicated in the interpretive release that, if a registrant uses reasonable estimates, assumptions or methodologies to determine the pay ratio, the pay ratio and related disclosure would not provide the basis for an SEC enforcement action, unless such disclosure was made or reaffirmed without a reasonable basis or was provided other than in good faith.
Continue Reading SEC and Division of Corporation Finance Issue New Pay Ratio Disclosure Guidance