Public companies in the United States would be required to disclose how the pay of their top executives squares with their overall performance under new rules proposed on Wednesday.
The draft measure by the U.S. Securities and Exchange Commission sparked sharp divisions among the agency's five commissioners, with its two Republicans saying it is too prescriptive, overly broad and should not be a top priority on the agency's rule-making agenda.
The proposal calls for companies to provide a table in their proxy statements that contains the total compensation actually paid to their principal executives, the total shareholder return on an annual basis, and the shareholder return on an annual basis of peer group companies, among other things.
Companies would also have to provide details on the average compensation paid out for other named executive officers, such as chief financial officers.
Large and mid-sized companies would have to provide the disclosures for the past five fiscal years, and smaller companies would need to offer three fiscal years worth of data.
Smaller companies would not have to provide a peer group comparison.
"It should make it easier for shareholders to locate, understand, and analyze executive compensation information before they have to vote," said SEC Commissioner Kara Stein, a Democrat, who supports the plan.
The SEC's plan is part of a package of executive compensation disclosures required by the 2010 Dodd-Frank reform law.
The agency previously proposed several other measures related to compensation disclosures.
Although some of them have managed to get adopted, such as rules that require shareholder votes on executive pay and "golden parachute" compensation packages, others have remained mired in controversy.
One rule that has yet to be adopted, for instance, calls for companies to disclose the ratio between the chief executive's compensation and the median total compensation for all other employees.
Organized labor groups such as the AFL-CIO strongly support the CEO pay ratio rule, but Republicans and the U.S. Chamber of Commerce have staunchly opposed it.
The SEC's two Republicans said on Wednesday they felt the rule represents a "one-size-fits-all" approach that could confuse investors.
They also lamented that smaller companies were not exempted from the rule.