Amid fury over bank bonus pay, the head of the House Financial Services Committee wants the Securities and Exchange Commission to require public companies to disclose the compensation of their top-paid employees who aren't senior executives, which would essentially revive a proposal the agency panned in 2006.
Under current SEC rules, companies disclose the pay of their chief executive officer, chief financial officer, and three highest-paid executive officers.
Financial Services Committee Chairman Barney Frank said the SEC "should expand the disclosure," according to a Feb. 2 report by Bloomberg. Doing so would potentially force Wall Street firms to reveal how much their top traders and money managers earn.
"They can do that without us," Frank is quoted as saying. "There's no point in legislating."
Steven Adamske, Communications Director for the House Committee on Financial Services, confirmed the report of Frank's comments as correct.
"We don't have an exact time for when we will have new legislation, but as Mr. Frank points out in the story, the SEC does not have to wait for us," he told Compliance Week in an e-mail.
Frank's remarks come amid backlash over reports that some banks are paying billions in bonuses a year after receiving huge government bailouts.
The idea is reminiscent of a proposal, floated and ultimately dropped by the SEC in 2006 when it overhauled its rules on pay disclosure, that would've required companies to disclose the total compensation and job description of their three highest-paid non-executive employees who earn more than the company's named executive officers.
Dubbed the "Katie Couric rule," since it would've required disclosure of the celebrity journalist's eye-popping pay as anchor of the "CBS Evening News," the proposal was later revised in response to sharp criticism from Corporate America. The narrower version targeted only non-executive employees with management responsibilities, excluding most traders, top salesmen, entertainers, and professional athletes. However, the SEC eventually dropped the proposal amid a firestorm of criticism from the business community, which argued that the disclosure wouldn't be material to investors and wouldn't help them understand pay decisions, since non-executive pay is often set differently from that of executive officers. Companies also said it would put them at a competitive disadvantage in the market for managerial talent.
In an e-mail response to a request for comment, SEC spokesman John Heine said, "The SEC recently revised our executive compensation disclosure rules and routinely reviews our rules to ensure they provide meaningful information to investors."
As previously reported, the SEC adopted new proxy disclosure rules in mid-December that require more disclosure about the relationship of a company's pay policies and practices to risk management and the board's role in risk oversight, among other things, amid concerns that Wall Street pay practices contributed to the financial crisis by incentivizing executives to take huge risks.
Frank also told Bloomberg that lawmakers are "discussing expanding legislation that lets shareholders weigh in on corporate pay" to give shareholders of financial companies "a vote on the percentage of annual revenue that's allocated to pay."
The House already approved a measure to give public company shareholders a non-binding advisory vote on pay for the named executive officers disclosed in corporate proxies as part of its Wall Street Reform legislation. The Senate is still hammering out its own reform legislation. An earlier draft also included a say-on-pay provision.