SEC Approves Pay Ratio Rule Created Under Dodd-Frank Act

RTR4YPI8 — U.S. Securities and Exchange Commission Chairman Daniel Gallagher spoke at the Sandler O'Neill + Partners, L.P. Global Exchange and Brokerage Conference in New York, June 3, 2015. Companies must start reporting their chief executive officers' total annual compensation as a ratio to their employees' median total compensation starting on or after Jan. 1, 2017. Reuters

The United States' Securities and Exchange Commission narrowly voted Wednesday to adopt the controversial pay ratio rule. By a 3-2 margin along party lines, the members approved the rule, which forces public companies to publish their chief executive officers' total annual compensation as a ratio to their employees' median total compensation, MarketWatch reported.

Wednesday's decision was a long time coming. Congress passed the rule as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, and the SEC proposed it in 2013, NPR reported. It has proven to be divisive, with Republicans and trade groups arguing it would be unnecessarily costly and burdensome.

The rule was due to take effect for companies' first fiscal year starting on or after Jan. 1, 2017.