U.S. companies must soon begin disclosing what many would rather keep secret: The ratio between the CEO's compensation and the paycheck of the company's median worker. The mandate was included in the 2010 Dodd-Frank Act to shed light on the growing income gap between executives and workers. Opponents say it's only meant to embarrass executives and won'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 how thousands of U.S. companies compensate their workers, plus a more accurate sense than ever before of the CEO-to-worker pay gap. According to the AFL-CIO, the average S&P 500 chief executive officer got $13.1 million in 2016, compared with about $37,000 for the average worker, a 347-to-1 ratio. The worker figure in that calculation is based on Bureau of Labor Statistics national sampling data; now, such ratios will be based on actual company payrolls.
2. Which companies must comply, and by when?
Publicly traded U.S. companies must disclose the ratio in regulatory filings for fiscal years starting on or after Jan. 1, 2017. Because executive compensation is always reported in the fiscal year after it's paid, most businesses will reveal their ratios for the first time in 2018. Small public companies and investment firms are exempt.
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