4 reasons companies do not want to disclose CEO pay ratio

 A rule approved by the Securities and Exchange Commission will require public U.S. companies to disclose pay ratios between the CEO and employees for the first time, leaving many company executives worried about how the disclosure will affect their company's operation, according to a Bloomberg report.

The rule, which the SEC voted to approve in 2015, was created to show investors how employees are treated. While the average American worker's pay has seen minimal changes in decades, CEO pay in the U.S. has continued to increase.

Here are four reasons companies fear disclosing CEO pay ratio, according to the report.

1. Since the disclosures are expected to spark debate on income inequality in the U.S., companies and directors fear how the media will characterize these ratios. Other companies expressed concern about how employees will react, especially the half of workers who earn below the median wage. The disclosures may therefore affect companies' negotiations with unions.

2. The larger the company, the more difficult it is to determine the median employee's pay. For example, global companies frequently use separate payroll systems in different countries and pay employees in various currencies. As a result, the SEC granted companies some discretion to lessen the burden of determining pay.

3. Comparisons could mislead workers since some comparisons might not show how a company calculated median worker pay. For example, investment banks, which tend to compensate employees well, may appear better than companies such as retailers, who rely on part-time workers making close to minimum wage, even if bank chiefs make significantly more than CEOs of retailers.

4. Pay figures for executives can vary by several million dollars from year to year, which will influence the ratio even if the median pay does not move.

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