As I promised in a prior email, I am following up to provide some additional observations on the proposed pay ratio rule:

• In my last email, I noted that the ratio could be calculated with the CEO pay in the denominator (and the median employee pay in the numerator).  What I did not pick up on in my initial read was that the median employee pay would be fixed at 1.  So, for example, rather than stating a ratio of 0.004:1, the ratio would read 1:250.
• While all employees would be considered in determining the median (including part-time, seasonal, temporary, and non-US workers), independent contractors or "leased" workers would not be included.
• Pay ratio disclosure would not be required for emerging growth companies, smaller reporting companies and foreign private issuers.  The SEC estimated that approximately 3,830 companies would have been subject to the proposed disclosure based on 2011 filings.
• The proposal mentions that the SEC sought and received comments on Section 953(b) prior to proposing the rule.  The institutional investors that commented appear to only include those with an environmental, social and governance focus and those representing unions.  Other large instituional investors wihout a specific social agenda did not comment.  Also notably absent from the list of commenters are ISS and Glass-Lewis.

I welcome any of your thoughts or observations about the proposal as I formulate my comments to the SEC.

To read the proposed rules, click on this link:  www.sec.gov/rules/proposed/2013/33-9452.pdf.  You might also be interested in reading Commissioner Gallagher's dissenting statement, Commissioner Piwowar's statement (against), Commissioner Aguilar's statement in support and Commissioner Stein's statement in support.