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Dumb law dept.: Dodd-Frank § 953(b)



Section 953(b) of Dodd-Frank directs the SEC to amend its executive compensation rule (Item 402 of Regulation S-K) to require disclosure of the: (1) median total annual compensation paid to all employees other than the chief executive officer; (2) the total annual compensation paid to the chief executive officer; and (3) the ratio between these two amounts.

This is, at the Financial Times notes, a logistical nightmare. It's also silly: two identically structured corporate pay scales could have wildly different ratios if one simply chooses to outsource all of its low-paid drudgework to outside firms, thus increasing its "median total annual compensation paid to all employees other than the chief executive officer." The major effect will be to deter companies from listing on US exchanges to avoid a pointless and expensive bureaucratic reporting requirement that adds no information to shareholders while driving up costs.

Update: Marc Hodak was ahead of the curve on this in March.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.