What is the 'Katie Couric Clause'

The Katie Couric Clause was a slang term to refer to a controversial rule that the Securities and Exchange Commission considered implementing in 2006, known formally as the Executive Compensation and Related Party Disclosure clause. It would have required companies to disclose the pay of up to three of the highest paid non-executive employees at a company, in addition to existing rules requiring firms to report the salaries of CEOs, CFOs and other high-ranking executive officers of public companies.

The Katie Couric Clause was so-called because it would have likely forced CBS to disclose the pay of Katie Couric, who became CBS's highest paid newscaster in April 2006, with a reported salary of US $15 million over five years.

BREAKING DOWN 'Katie Couric Clause'

Both major media companies, such as CBS, NBC and the Walt Disney Co., and large, Wall Street firms opposed the SEC's controversial proposal. Media companies and financial services firms were thought to be the types of firms most affected by the proposal, since they often pay high salaries for employees who aren’t C-Suite executives. Such firms are often reluctant to disclose detailed compensation information because they see it as an invasion of employees’ privacy, and also expose proprietary information that would enable competitors to poach their employees. While the employees in question would not have to be named, many believe that it would not be hard to attach a name to the details.

Current SEC rules demand that salaries of the top five executives in publicly-traded companies to be disclosed. If this new rule were adopted, companies would have had to disclose total compensation of up to three non-executive employees whose pay exceeds that of any of its top five managers. Supporters of this proposal say this rule would create greater transparency and give investors increased access to information, which should make for better-informed decisions.

Current SEC Rules on Executive Compensation

The Katie Couric Rule was not adopted by the SEC in 2006, but new regulations concerning the disclosure of information concerning executive compensation was required by the 2010 Dodd-Frank financial reform legislation. As a result of that law, the SEC adopted new rules requiring companies to disclose the ratio of pay between its chief executive officer (CEO) and its median employee. Proponents of this new regulation say it gives investors important information about executive compensation, as a high ratio of CEO to median worker pay may suggest that the board is overpaying for its executives. Opponents of the rule argue that the disclosure rule simply encourages firms to outsource their low-paying labor to services companies. 
 

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