While many in corporate America are hoping that the one-two punch of President Donald J. Trump and a Republican-majority Congress will ultimately tear that Dodd-Frank Act mandated rule from the books, Senate Democrats are pushing for speedy implementation.
Sen. Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee, this week wrote a letter to the SEC, specifically Acting Chair Michael Piwowar, urging the agency “to cease any delay” in implementing the final rule.
The rule, pushed to the SEC by the Dodd-Frank Act and adopted in August 2015, requires a public company to disclose the ratio of the median of the annual total compensation of all employees to the annual total compensation of the chief executive officer.
In February, Piwowar announced that the much-maligned pay ratio rule, which he says is causing “unanticipated compliance difficulties,” is under reconsideration.
Critics have pushed back against the rule on both conceptual grounds—viewing the data demand as part of a name-and-shame campaign by unions, media, and activists—and logistical ones, especially for multinationals facing cost of living and pay differentials in low-income countries, various inflation rates, and currency fluctuations.
“Based on comments received during the rulemaking process, the Commission delayed compliance for companies until their first fiscal year beginning on or after Jan. 1, 2017,” Piwowar wrote. “Issuers are now actively engaged in the implementation and testing of systems and controls designed to collect and process the information necessary for compliance. However, it is my understanding that some issuers have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline.”
In order to better understand the nature of these difficulties, he announced that the SEC is seeking public input on “any unexpected challenges that issuers have experienced as they prepare for compliance with the rule and whether relief is needed.”
The comment period will be open for 45 days, beginning on Feb. 6. Piwowar also directed staff “to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”
The Menendez letter was cosigned by Sens. Jack Reed (D-R.I.), Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), Richard Durbin (D-Ill.), Chris Van Hollen (D-Md.), Jeff Merkley (D-Ore.), Al Franken (D-Minn.) and Bernie Sanders (I-Vt.).
“We are concerned that your unilateral decision to open a second public comment period on a rule that has already been adopted by the SEC is solely intended to discredit the rule and generate momentum to repeal the statutory requirement,” they wrote. “Moreover, we are alarmed that your remarks appear to solicit comments from issuers only, improperly overlooking the views of the thousands of investors that submitted comments to the SEC prior to its adoption of the final rule.”
“For nearly seven years, investors have been waiting for this disclosure, and now as the first reporting period has just begun, you have inexplicably halted this important investor tool,” the letter added. “We urge you to retract your statement opening a new public comment window on the rule and directing SEC staff to reconsider the rule, and we expect the SEC to allow the full implementation of the CEO-to-worker pay ratio disclosure rule to recommence without delay.”
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