The Securities and Exchange Commission yesterday voted 3-2 to propose a new rule that would require public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees.

The new rule, required under the federal Dodd-Frank Act, would not prescribe a specific methodology for companies to use in calculating a “pay ratio.”  Instead, companies would have the flexibility to determine the median annual total compensation of its employees in a way that best suits its particular circumstances.

“This proposal would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate,” said SEC Chair Mary Jo White.  “We are very interested in receiving comments on the proposed approach and the flexibility it affords.” 

The proposal will have a 60-day public comment period following its publication in the Federal Register. Visit the SEC’s website for more information.