US companies forced to disclose CEO-workforce pay gap

Publicly traded US companies will now be forced to reveal the gap between their CEOs pay and the median pay of their workforce.

The rule was passed by the US Securities and Exchange Commission (SEC) yesterday. The SEC were assigned with enacting a number of provisions contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act; one of which was the pay-ratio rule, which passed by a 3-2 vote. Two Republican commissioners voted against it.

The rule is set to come into force in 2017. Companies will get to decide the methodology of the median employee pay, which can be calculated once every three years instead of every year.

Companies can also exclude five per cent of their overseas employees when calculating the figure. The initial compliance cost is estimated at £832million.