Both SEC Republican Commissioners also opposed the rule Wednesday.
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The new ruling does not limit how much a CEO can earn in relation to their employees, but rather requires public companies to compare their chief executive’s compensation, which is already announced once per year, against the median pay of other employees in the company.
“We finally have an official yardstick for measuring CEO greed”, she said. The vote likely won’t be the end of the fight over the issue.
The US Chamber of Commerce is also reportedly consider pushing Congress to pass legislation to repeal the rule.
CEO pay has been under fire in Massachusetts, including recent revelations that the chief executive of Vertex Pharmaceuticals Inc. was awarded $36.6 million last year, prompting harsh criticism from investors.
Annual total compensation as determined under existing executive compensation rules; or Any consistently-applied compensation measure from compensation amounts reported in its payroll or tax records.
Speaking against the rule, Commissioner Daniel M. Gallagher, a Republican, says the description of the measure as a helpful tool for American taxpayers “is pure applesauce” – quoting Supreme Court Justice Antonin Scalia’s take on the court’s Affordable Care Act ruling.
But while Mishel said that he was “heartened” by adoption of the rule, Gallagher blasted it as perhaps “the most useless of all our Dodd-Frank mandates”.
“Addressing perceived income inequality is not the province of the securities laws or the Commission”.
The SEC says it has addressed companies’ concerns about the cost of gathering the information by giving them flexibility in how they meet the requirements.
The rule includes fewer concessions than were sought by companies.
The new law is likely to boost the power held by investors when firms release their remuneration reports. The company will have to obtain a legal opinion from its lawyers attesting to the predicament. Also, within those three years, if the median employee’s compensation changes, the company may use another employee with substantially similar compensation as its median employee. “The public relies on the SEC to act as the cop on the beat for an honest marketplace-issuing rules that ensure that investors can make informed decisions and holding rule breakers accountable for their actions”, the lawmaker wrote. They are urging the SEC to delay the implementation until next year. The companies “should not be able to fudge the numbers there”. “The record suggests that unfortunately, the public campaign keeping up the pressure and demanding that the rule be finalized does seem to have been necessary”. “I can not understand how and why this rule has been delayed for so long”.
The rule, approved Wedensday, stems from the 2010 Dodd-Frank overhaul of financial regulation. Companies can exclude from the median pay calculations up to 5 per cent of their employees outside the U.S.
In 2014, the electric and gas utility reported a 24-1 ratio, which means the company’s top executive made 24 times more than the average employee.
CEOs make a lot more than the average working Joe or Jane, but public reporting of the gap is unlikely to result in a rush to cut executives’ pay packages or boost employee salaries.
Opponents argued it will cost up to $700 million of taxpayers money to gather information – wildly extortionate compared with the SEC’s estimate of about $73 million.
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Among the handful of other companies that have done so voluntarily are natural gas utility NorthWestern, Whole Foods Market and Bank of South Carolina.
