After Five Years, Dodd-Frank CEO Pay Rule Finally Takes Effect

| by Amanda Andrade-Rhoades

Five years after Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission has adopted a rule included in the legislation that will require public companies to list their chief executives' total annual compensation, including bonuses, as a ratio to their workers’ average pay, NPR reported.

Still, the rule does have some catches. Companies can exclude 5 percent of their foreign employees and use statistical samples to arrive at the ratio, NBC News reported. Companies who have less than $75 million in total external shares or less than $50 million in annual revenue don’t have to disclose their pay ratio. "These are good and reasonable changes that should reduce costs for many companies" said SEC Chair Mary Jo White said before the vote.

Many supporters hope it will pressure companies into reducing the inequality between top executives and their employees. Though the vote came down  3-2 in favor of implementing the measure, the SEC received 280,000 comments in support of the pay ratio rule.

"We're glad that the commission finally finalized this rule," Heather Slavkin Corzo, director of the AFL-CIO's Office of Investment, told Huffington Post."It's been five years. It's about time.”

The rule represents something of a coup for Democratic Sen. Elizabeth Warren of Massachusetts, who has been pushing hard for reform on Wall Street.

"This was not an incredibly complicated rule, despite the effort to make it sound so," said Lisa Donner, executive director at Americans for Financial Reform. "The record suggests that unfortunately, the public campaign keeping up the pressure and demanding that the rule be finalized does seem to have been necessary.”

Sources: NBC News, NPR, Huffington Post Image via Francisco Osorio/Flickr