The Securities and Exchange Commission adopted the pay ratio rule by a 3-2 margin along politically partisan lines on Wednesday. The rule is a requirement of the Dodd-Frank law that mandates public companies to disclose the ratio of the annual total compensation of the chief executive officer to the median of the annual total compensation of the company's employees. Companies are required to report the pay ratio information beginning with their first fiscal year beginning after January 1, 2017. Smaller reporting companies, foreign private issuers, MJDS filers, emerging growth companies, and registered investment companies are not required to make the disclosures. The ratio calculation must include all employees - U.S. and non-U.S., full-time, part-time, temporary and seasonal. Companies may, however, exclude non-U.S. employees that work where data privacy laws prevent the company from complying with the rule without violating those laws. Up to 5% of its non-U.S. employees can also be excluded, including any non-U.S. employees excluded based on data privacy concern.
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