Dodd-Frank CEO Pay Ratio Disclosure Requirement

Although final rulemaking on the Dodd-Frank (Section 953) CEO pay ratio disclosure requirement has now been delayed until the first half of 2012, we thought you would be interested in the attached SEC comment letter that addresses many of the conceptual deficiencies of the requirement. The comment letter was a collaborative effort by many leading executive compensation lawyers and supports wholesale repeal of the requirement or, failing that, advocates several modifications to ease the burden of the requirement. Those modifications include:

• At least two years of implementation time following adoption of the rule;
• Exclusion of non-US employees from the calculation;
• A safe harbor for using W-2 compensation (or comparable measurement for non-US employees, if they are included in the calculation) in lieu of “total compensation” as defined by the proxy rules for non-NEO employees;
• A “good faith efforts” standard for determining the median amount of pay;
• Flexibility in selecting the date as of which median pay is determined; and
• Authorization to provide an alternative voluntary measure of relative CEO pay, such as for example the ratio of CEO pay to average pay of private non-farm workers as compiled by the Bureau of Labor Statistics, which would promote comparability of disclosure across companies.