fresh voices from the front lines of change







The 2010 Dodd-Frank law required the Securities and Exchange Commission to write "clawback" rules that make CEOs return compensation they receive when the money is earned through accounting gimmicks and not through actual performance. The SEC still has not done this.

The New York Times looked at this in "A Blank Page in the S.E.C. Rule Book, Four Years Later":

Under the law, the S.E.C. was supposed to direct the stock exchanges to bar securities from trading if they were issued by companies with no clawback policies. That should be a huge incentive for companies to write such policies. But what those policies should include seems to be stymieing the S.E.C.’s rule writers.

Why so long?

Last week, I asked Keith F. Higgins, director of the S.E.C.’s division of corporation finance, why it was taking so long to write this rule and what it might look like when it finally comes.

“I expect the division will recommend a proposal that will faithfully implement what the statute seemed to be getting at — the concept of clawing back even when there’s no fault,” he said.

“Getting a proposal out is part of what we expect to get done over the next year.”

Over the next YEAR?

William K. Black writes at New Economic Perspectives in "CEO Compensation: “Cheaters Prosper”" that current CEO compensation rules encourage CEOs to commit fraud.

This article explained the SEC’s unwillingness to adopt a rule recovering unwarranted executive compensation as provided by the Dodd-Frank Act. These are called “claw back” provisions. While the scandal of not prosecuting any of the senior officers who were enriched by leading the three epidemics of accounting control fraud that drove the financial crisis for those frauds is well known, the public does not understand that the fraudulent senior bankers have also been able to keep virtually all of the fraud proceeds they received through leading the accounting control frauds.

CEO/Worker Pay Ratio Rule Delayed, Too

Speaking of the SEC taking its sweet time, what happened to the requirement that the SEC make companies disclose their CEO/worker pay ratio? In September 2013, I wrote in "SEC Finally Moves Rule Requiring Disclosure Of 'Pay Ratios'" that "The Securities and Exchange Commission (SEC) today (finally) proposed specific rules that will make this actually happen." Except they didn't.

Then in November 2013, in "While Swiss Limit CEO Pay, We Can’t Even Enforce Our Pay Laws," I wrote, "The Wall Street reform law that passed in 2010 includes a requirement that companies disclose the ratio of CEO pay to median pay. This law is still obstructed from enforcement."

This from September 2014, from Jena McGregor of The Washington Post News Service, in "SEC under pressure to finalize rules disclosing CEO pay ratios":

There still isn't an active rule. On Sept. 19, a year after the initial rule was proposed, the nonprofit organizations Americans for Financial Reform and Public Citizen issued a statement urging the SEC to finalize it. The SEC has not announced a timetable on the rule, but SEC Chairman Mary Jo White has testified that completing the rulemaking required by the Dodd-Frank Act is one of her priorities. She said it is her "hope and expectation" to complete it by the end of the year.

So it's November 2014, and there are still no CEO/worker pay-ratio rules from the SEC.

P.S.: The SEC is also sitting on rules to make companies disclose to their own shareholders how much they spend on politics.

How do you spell "industry capture of regulators"?

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