Let it never be said that Michael Piwowar, Republican member of the Securities and Exchange Commission, does not argue his views energetically.
When the SEC adopted its CEO pay ratio disclosure rule on Aug. 5, Piwowar denounced and fulminated as any self-respecting conservative would—at one point dismissing the rule as “Saul Aliskyian tactics by Big Labor and their political allies.” The rule passed anyway on a 3-2 vote along the usual party lines. All five commissioners published their own statements about the rule, as they often do when voting on major policy questions.
Now, in case anyone remains unclear on Piwowar’s feelings or who Saul Alisky is, Piwowar has taken the extraordinary step of publishing a second statement about the pay ratio rule and his opposition to it. Aptly titled “Additional Dissenting Comments on Pay Ratio Disclosure,” the statement clocks in at 4,156 words, 76 footnotes, and six accusations that the SEC failed to adopt the rule properly.
The gist of Piwowar’s statement is that the SEC violated the Administrative Procedures Act by failing to articulate what the pay ratio rule is supposed to accomplish, and then poorly crafted the rule with inaccurate definitions of who an “employee” is and by ignoring academic studies suggesting that pay ratio disclosure might actually lead to increases in CEO pay. Lastly, he said, using the rule might force investment advisers to violate their fiduciary duties as dictated under the Investment Advisers Act.
The tone and structure of Piwowar’s statement—carefully crafted, heavily footnoted, offering point-by-point arguments that the SEC either violated its own rulemaking procedures or adopted a rule that contradicts other laws—add fuel to the theory that his criticisms (and those of his fellow Republican commissioner, Dan Gallagher) will become the blueprint for a lawsuit by other opponents of the rule. Tellingly, Piwowar cited the U.S. Chamber of Commerce in his very first complaint, that the SEC violated the Administrative Procedures Act. The Chamber has taken the SEC to court numerous times over its rulemaking.
“Should the final rule become effective, I have one request for companies,” Piwowar said at the end of his statement. “Please keep track of your compliance costs and consider voluntarily disclosing that information alongside your pay ratio. The Commission and others should have an understanding of your actual compliance costs, and voluntary disclosures would make the likely incredibly high costs evident.”
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