U.S. companies must soon begindisclosing what many would rather keep secret: The ratio betweenthe CEO's compensation and the paycheck of the company's medianworker. The mandate was included in the 2010 Dodd-Frank Act to shedlight on the growing income gap between executives and workers.Opponents say it's only meant to embarrass executives andwon't be useful to investors. One critic called it an example of“bigotry against the successful.”
1. What are we likely to learn?
The disclosures will provide a first-ever glimpse into howthousands of U.S. companies compensate their workers, plus a moreaccurate sense than ever before of the CEO-to-worker paygap. According to the AFL-CIO, the average S&P 500 chiefexecutive officer got $13.1 million in 2016, compared with about$37,000 for the average worker, a 347-to-1 ratio. The worker figurein that calculation is based on Bureau of Labor Statistics nationalsampling data. Now, such ratios will bebased on actual company payrolls.
2. Which companies must comply, and by when?
Publicly traded U.S. companies must disclose the ratio inregulatory filings for fiscal years starting on or after Jan. 1,2017. Because executive compensation is always reported in thefiscal year after it's paid, most businesses will reveal theirratios for the first time in 2018. Small public companies andinvestment firms are exempt.
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