The gap in pay between chief executives and rank-and-file employees has been growing steadily, and now regulators want companies to tell investors just how wide it is.
The Securities and Exchange Commission, addressing an issue that has captured the public’s attention like few others at the agency, proposed a rule on Wednesday that would require publicly traded companies to disclose the difference between the pay of chief executives and their employees.
Three of the five members of the S.E.C. voted in favor of the proposal, which would require public companies to report the ratio of top executive compensation to the median compensation of their employees. Median pay is the point at which half the employees earn more and half earn less.
Public scrutiny over outsize pay packages at some of the country’s biggest companies has intensified since the financial crisis, and the S.E.C. said it had received more than 20,000 public letters in support of and opposition to its new proposals.
The response from the S.E.C.’s five commissioners reflects the divisive nature of the topic of executive pay. One commissioner, Daniel M. Gallagher, called the proposal a “rotten mandate” while another, Luis A. Aguilar, emphasized it as a significant step toward “enhanced accountability.”
The proposal is part of the Dodd-Frank financial overhaul legislation, which requires the S.E.C. to amend existing rules on pay disclosure. Publicly listed companies are now required to disclose the compensation of their chief executives but not pay for other employees.
The commission has proposed that companies disclose two additional data points in their filings. One is the median of the total compensation for all employees excluding the chief executive, and the other is the ratio between that number and the chief’s annual total compensation.
The median pay package for the country’s top 200 executives was $15.1 million last year, according to Equilar, the executive compensation analysis firm. That was an increase of 16 percent from 2011.
Proponents of the new rules praise the move as progress toward more transparency and increased information for investors, with the added benefit of putting pressure on boards to curb increases in executive pay.
“There are huge problems with pay disparity both within our portfolio and in society,” said Michael Garland, who leads corporate governance in the New York City comptroller’s office, which oversees $139 billion in pension fund money and votes on corporate compensation packages for more than 3,500 companies.
“It’s bad for productivity and for morale,” he said.
Critics of the proposed rules complain that the method for determining median income is too complex, time-consuming and costly. The S.E.C. declined to provide a formula for calculating the ratio between the pay of chief executives and employees, saying companies could choose their own methods.
Many of the letters sent to the S.E.C. tried to tackle the question of how to evaluate pay without burdening large companies.
In one public letter, Peter M. Fasolo, vice president for human resources at Johnson & Johnson, suggested comparing top executive pay with shareholder return over a number of years. This, Mr. Fasolo wrote, “best reflects the spirit of the Dodd-Frank Act.”
In another letter, a law and engineering student at Stanford submitted an explanation of how a company could take a random sample and determine median pay without getting a bias.
Addressing these concerns, the S.E.C.’s chairwoman, Mary Jo White, emphasized on Wednesday that the agency would provide companies some flexibility in complying with the rules. This would include allowing them to determine the median pay of their employees by using a statistical sample.
“The S.E.C. has done a terrific job of balancing the need to have better information with the difficulty of producing that information,” said Nell Minow, co-founder of Governance Metrics International.
Ms. Minow predicted that companies would tend to adopt a formula for calculating pay based on their sector. Large multinational companies with large and complex operations would choose a different method from one used by young technology companies, for example. “In general you will find there will be apples-to-apples comparisons within sectors,” she said.
In the wake of scrutiny on executive compensation from shareholders and the general public, companies have included less cash in compensation packages and more in restricted stock. But even with this trend, the compensation of top executives has grown exponentially over the last few decades.
Executive pay is now more than 277 times an average worker’s pay, compared with just 20 times in 1965, according to the Economic Policy Institute.
“Clearly we have a steep uptrend,” said Mr. Aguilar, the S.E.C. commissioner.
Ms. White, Mr. Aguilar and Kara M. Stein all voted for the proposal. Daniel M. Gallagher and Michael S. Piwowar voted against it.
“Today, the commission will vote on proposed rules to implement yet another Dodd-Frank mandate having nothing to do with the S.E.C.’s mission and everything to do with the politics of not letting a serious crisis go to waste,” Mr. Gallagher said.
Mr. Piwowar said the proposal would “unambiguously harm investors.”
The agency will collect comments for 60 days and must vote on the proposal again before it goes into effect.