It is anticipated that there will be legal challenges to the Securities and Exchange Commission’s chief executive pay ratio disclosure rule that was adopted August 5. One of the challenges to whether or not the pay ratio disclosure is constitutional may be based upon the First Amendment, according to SEC Commissioner Daniel Gallagher who did not vote in favor of adopting the rule.

He based his opinion on a ruling by the U.S. Court of Appeals for the District of Columbia Circuit that struck down a Dodd-Frank Act rule that requires disclosures about conflict minerals used in a company’s supply chain. Because the pay ratio rule’s required disclosures are less onerous than the conflict minerals rule, that rationale may not be a strong argument to challenge the new SEC ruling.

“I think the conflict minerals [case] involves a lot more issues that this doesn’t necessarily raise,” said Mary Mullany, a partner with Ballard Spahr in Philadelphia. “After all, it’s just one number. It’s not disruptive to your supply chain.”

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Employee Benefits and Executive Compensation