The Advisors' Blog

– Broc Romanek, CompensationStandards.com

One of my in-house friends recently noted that a “sleeper” in the SEC’s recently-proposed rules on pay ratios involves the compliance date. Under the proposal, companies that don’t have December 31st fiscal year-ends might not have the luxury of an extra year before complying as December 31 year-end companies would.

As proposed, companies would have to begin complying for their first fiscal year commencing on – or after- the effective date of the rule. The proposing release explains that if the final requirements were to become effective sometime in calendar year 2014 – which is likely to be the case – a company with a fiscal year ending on December 31 would be first required to include pay ratio information relating to compensation for fiscal year 2015 in its proxy statement filed in 2016. This gives those companies a long transition period.

However, if the requirements were to become effective prior to July 1, 2014 – then companies with fiscal years beginning on – or after – July 1, 2014 would be required to include pay ratio disclosures for fiscal year 2014 in their proxy statements filed in 2015 for their 2015 annual meetings. They would not have the extra year’s worth of lag time.

The SEC can easily fix this problem by including a reference in the compliance provision to January 1st when it adopts final rules – which would in effect make the final rule effective for all companies for their 2016 annual meetings regardless of their fiscal year end…