Is The SEC Defying Dodd-Frank Law On Pay-Ratio Rule?

Dave Johnson

In July 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 953(b) of that law directs the SEC to require public companies to disclose the median annual total compensation of all employees, the total annual compensation of the chief executive officer, and the ratio of the median employee pay to the CEO’s pay. This gives investors and the public clues to whether — and the extent to which — the company is being looted from the top.

Here is what the law says:

H.R.4173 SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES.

(1) IN GENERAL- The Commission shall amend section 229.402 of title 17, Code of Federal Regulations, to require each issuer to disclose in any filing of the issuer described in section 229.10(a) of title 17, Code of Federal Regulations (or any successor thereto)–
(A) the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position) of the issuer;
(B) the annual total compensation of the chief executive officer (or any equivalent position) of the issuer; and
(C) the ratio of the amount described in subparagraph (A) to the amount described in subparagraph (B).

That was 2010. Tick, tick …

March 2012, “SEC finalizing Dodd-Frank CEO pay ratio rule within two months“:

Under pressure from restless lawmakers awaiting action, Securities and Exchange Commission Chairwoman Mary Schapiro said her agency will implement the federally mandated CEO-to-employee pay ratio disclosure requirement “in the next couple of months.”

Tick, tick …

March 2013, (Robert Borosage): “Mary Jo White at SEC: Watchdog or Lap Dog? The CEO Pay Test” — definitely worth a read.

April 2013, “CEO Pay And SEC Delay“:

The SEC delays and delays, and then the head of the SEC leaves to take a high-paying job with a “bank consulting” firm.

[…]

Revolving Door And Captured Regulators

After delaying and delaying the regulations, the head of the SEC left to take a high-paying job with a “bank consulting” firm.

Marketwatch, April 2, SEC ex-chief Schapiro lands consulting-firm job

Less than four months after stepping down as the top U.S. securities regulator, Mary Schapiro is joining a consulting firm that has built a reputation as a shadow regulator by hiring scores of former government officials.

September, 2013, SEC Finally Moves Rule Requiring Disclosure Of ‘Pay Ratios’.

November, 2013, While Swiss Limit CEO Pay, We Can’t Even Enforce Our Pay Laws,

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. …

American Obstruction

The 2010 ‘Dodd–Frank Wall Street Reform and Consumer Protection Act’ includes a rule that publicly traded companies must report their “pay ratio” — the ratio of CEO compensation to median worker compensation in that company. The idea is that this lets investors and the public know whether and the extent to which a company is being looted from the top.

This law passed in 2010 but still is not in effect. Under this law all that companies have to do is disclosethe ratio. But we can’t even get this law — yes it is the law — to take effect. Conservatives go absolutely batcrap crazy about “illegals” — undocumented immigrants — because “they broke the law,” but when it comes to laws that might have even the smallest of small effects on Wall Street and the 1%, not so much.

After all these years the Securities and Exchange Commission (SEC) finally proposed just this September some specific rules for enforcement. (The two Republicans on the commission voted to block implementation of this rule so companies could continue to violate this new law and keep their pay ratio secret.) Of course, the proposed rules are weaker than the law intends — the proposed rules allow companies to use “sampling” and “estimates” that they come up with instead of actually compiling all of the data as required by the law. But at least the SEC has finally, years later, gotten far enough through the obstruction to propose rules to eventually, maybe enforce this law.

Tick, tick …

November, 2014, We’ve Been Waiting Too Long For Those CEO Pay Rules From The SEC,

… [W]hat 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.

Tick, tick …

“Nowhere To Be Found”

January 2015, Andrew Ross Sorkin writing in the New York Times’ Dealbook, “S.E.C. Has Yet to Set Rule on Tricky Ratio of C.E.O.’s Pay to Workers’

Mary Jo White, the chairwoman of the Securities and Exchange Commission, said in November that she hoped the rule would be completed before the year ended. Now it is the new year, and the rule remains, well, nowhere to be found.

February 2015, still nothing.

Is the SEC simply defying the law? Is everyone at the SEC hoping for a lucrative “revolving door” job offer from Wall Street, as long as they “play ball”?

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