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On September 18, 2013, the Securities and Exchange Commission (“SEC”) proposed a rule that would require most public companies to disclose, annually, the ratio of the median of the annual total compensation of all of the company’s employees to the annual total compensation of the company’s principal executive officer. This rule is mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  The comment period on the proposed rule ends 60 days after the proposing release is published in the Federal Register.

While the pay ratio disclosure is mandated by the Dodd-Frank Act, the statute sets no deadline for the SEC to act, and there are legitimate questions about the usefulness of the proposed disclosure to investors. In this respect, the proposed rule is, arguably, yet another example of using SEC disclosure rules to advance public policy goals not squarely rooted in the SEC’s historic mission of protecting investors.  Further, despite steps taken by the SEC to reduce compliance costs for companies, the proposed rule would, if enacted, certainly increase the costs and time required for companies to accurately prepare their executive compensation disclosures, including the likely need for many companies to retain outside advisors to assist in the statistical sampling and compilation process.
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Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) recently updated their proxy voting guidelines for the 2013 proxy season.  The complete 2013 Updates to ISS’s U.S. Corporate Governance Policy are available here.  Key updates from both proxy advisors relating to executive compensation and compensation-related matters are discussed below.  While the 2013 policy updates represent incremental rather than wholesale changes to the respective advisor’s voting guidelines, they also reflect, at least in part, responses to critiques of their pay-for-performance analyses voiced during the 2012 proxy season.  Public companies are urged to take the 2013 policy updates into account when reviewing existing practices and policies and considering changes. 
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