Pay ratio rules tipped for cost-benefit challenge

Author: Danielle Myles | Published: 1 Jun 2012

Dodd-Frank’s requirement that public companies disclose internal pay equity details is a top candidate for the next regulation to be challenged in court on the grounds of cost-benefit analysis.

Ironically, emerging growth companies’ temporary relief from the rule under the Jumpstart Our Business Startups (Jobs) Act could help in this regard.

Section 953(b) of Dodd-Frank requires publicly listed companies to disclose the ratio of CEO pay as a proportion of the median-paid employee at the company. It is generally viewed as a reactionary provision and faced opposition almost immediately.

The collection and organisation of data is particularly burdensome for large and global companies, and revealing the pay disparity between the CEO and median employee is of questionable benefit to shareholders. This makes it ripe for a courtchallenge on the grounds of inadequate cost-benefit analysis.

“There is a decent likelihood that, if a final...