How much more does your boss make? S.E.C. says you now can know

The Securities and Exchange Commission ruled Wednesday that CEO-median employee pay ratios must be disclosed.

Jose Luis Magana/Reuters/File
SEC Chair Mary Jo White testifies at a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in this July 30, 2013 file photo.

The Securities and Exchange Commission (SEC) ruled Wednesday by a vote of 3-2 that employees of public companies could now know the difference between their salary and that of their boss. This decision comes five years after Congress directed the SEC to mandate businesses disclose pay ratios under the Dodd-Frank Act.

“To say that the views on the pay ratio disclosure requirement are divided is an obvious understatement,” said Mary Jo White, chair of the SEC, at an open hearing Wednesday.

One of the chief reasons why company stakeholders are interested in knowing what the CEO makes is “when considering a company’s executive compensation practices," said Ms. White. CEO compensation is increasingly "an important area of corporate governance on which shareholders now have an advisory vote,” she added. 

Wednesday's vote will implement section 953(b) of the Dodd-Frank Act – which effectively constituted a “statutory mandate” from Congress, according to White. Under this section of the 2010 act, a company is required to disclose the ratio of the total annual salary of the company’s median paid employee to the total annual salary of the chief executive.

And those ratios can be staggering. In 2013, the “average multiple of CEO compensation to that of rank-and-file workers is 204,” while some were over 1,000 times higher, according to Bloomberg Business. The 2013 average difference in pay ration was up 20 percent from 2009.

While there are numerous exceptions to the rule, these exceptions are both “flexible and faithful to the terms and objective of the statute,” according to White. These deviations include a certain amount of leniency as to what month the year’s salary is calculated from, an allowance for “estimates and sampling” in determining the median employee, and the exclusion of “emerging growth companies” from disclosing pay ratios, (as stipulated by the 2012 JOBS Act).

Additionally, up to five percent of non-US employees per company can be excluded from the calculation of the median employee’s salary, in order to cooperate with foreign data-privacy laws, according to the SEC.

“There are definitely weaknesses that we are concerned about,” said Heather Slavkin Corzo, director of investment for the AFL-CIO, to The New York Times.   

Section 953(b) is scheduled to be implemented in 2017, said James D.C. Barrall, a partner at Latham & Watkins who specializes in executive compensation, to The Wall Street Journal. Which means that the first time you’ll know the ratio of salaries in your office – if you don't already – will be in 2018, when the previous year’s financial statements are disclosed.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to How much more does your boss make? S.E.C. says you now can know
Read this article in
QR Code to Subscription page
Start your subscription today