What is the importance of Section 953(b) of the Dodd-Frank Act to investors and boards of directors?


On 6 February 2017, the US Securities and Exchange Commission (SEC) delayed compliance with section 953 (b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)[1] for companies until their first year beginning on or after 1 January 2017. Section 953 (b) of the Dodd-Frank Act requires public companies to disclose the pay-ratio of the compensation between the chief executive officer (CEO) and the median employees. This new rule has been a focus of discussion related to the disclosure of this information for the investors’ benefit. It is highly important to evaluate that the information that could be disclosed will be used to benefit the institution and does not result in direct benefit to investors. Despite the discussion related to the compensation of CEOs, median employees and the potential interest to investors, we consider it appropriate to include the board of directors’ accountability in this analysis. In fact, the relationships among investors, the board of directors, management and employees are part of the corporate governance management that will be impacted by this section.