Dodd-Frank chief executive pay law 'difficult to implement'

31 August 2010

A key piece of legislation contained within the Dodd-Frank Act linking chief executives' pay with that of their firms' employees will be highly difficult to implement, it has been suggested.

Under the legislation, US companies will have to publish the ratio between the average salary of workers and the pay package received by the chief executive.

Richard Susko, partner at law firm Cleary Gottlieb, told the Financial Times that the law has the potential to be a "logistical nightmare", as calculating the median annual remuneration of employees will be highly complicated.

"It's just not doable for a large company with tens of thousands of employees worldwide," he stated.

But senator Robert Menendez, the man who sponsored the proposal, said disclosure will help to encourage fairer pay practices at a time when "CEO pay has skyrocketed".

Earlier this month, AIG warned that it may need to raise capital if stress tests are conducted on the firm under the Dodd-Frank Act rules and find it does not have enough money to absorb losses should it face adverse economic conditions, reported Bloomberg.

By Gary Cooper

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