Michael Piwowar has been seething for some time. Now he’s getting to take his revenge — against the new federal regulation that’s driving America’s mega-millionaire CEOs crazy.
This particular regulation spells out how corporations must go about complying with an innovative provision of the Dodd-Frank Act, the Wall Street reform legislation enacted in 2010. The provision requires corporations to annually disclose the ratio between what they pay their CEOs and what they pay their median — most typical — workers.
Piwowar has been trying to stop this disclosure from going into effect ever since he became a member four years ago of the five-member panel that runs the Securities and Exchange Commission, the federal watchdog agency that oversees Wall Street.
In 2013, Piwowar’s initial year as an SEC commissioner, he had his first chance to fulminate against pay-ratio disclosure when a draft of the agency’s enforcement rule came up for a vote. Ratio disclosure, Piwowar charged, would “unambiguously harm investors.”
Piwowar lost that vote, by a 3-2 margin. Two years later, he had another crack at stopping corporate pay disclosure when the SEC’s draft rule came up for final adoption. This time around, Piwowar, a former Senate GOP committee staff economist, unleashed a much shriller stream of vituperation.
Pay ratio disclosure, Piwowar blasted out, rewards “Saul Alinskyan tactics by Big Labor.” Adopting a disclosure rule, Piwowar pronounced, would signal a surrender to “politically-connected special interests” and an “acquiescing to the bullying tactics of their political allies.”
“Acquiescing to bullies,” he then declaimed, “only gives them more ammunition and makes it worse.”
A more than slightly bemused Commission majority ignored all this invective and went on to approve the pending pay-ratio disclosure regulation. Under the Commission’s decision, corporations had more than a year to get prepared for calculating the new requited disclosures.
Last month, on January 1, the Dodd-Frank pay ratio disclosure mandate finally went fully into effect, and corporate human resources departments are now calculating their fiscal 2017 CEO-worker pay differentials. The first corporate proxy statements carrying these pay ratio figures will start appearing early in 2018.
Or at least that’s how things stood before Donald Trump’s inauguration. Since then, things have changed. President Trump — who loudly inveighed against excessive CEO pay throughout his campaign for the White House — has appointed Piwowar, Washington’s most outspoken apologist for CEOs, the acting SEC chairman.
Earlier this week, as acting chair, Piwowar began flexing his CEO-friendly muscles. Corporations, he announced, “have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline” of the new pay-ratio disclosure mandate.
“Relief” from the disclosure mandate, Piwowar continued, may be needed. Corporations will now have 45 days to share “any unexpected challenges” they “have experienced as they prepare for compliance.” Piwowar is also directing SEC staff “to reconsider the implementation of the rule based on any comments submitted.”
In other words, Piwowar wants to see the pay-ratio disclosure regulation relitigated — and delayed to whenever Congress can finally get around to repealing Dodd-Frank.
What’s driving Piwowar’s intense hostility toward disclosing how much more that CEOs make than their workers? His ostensible objections fill a 4,156-word, 76-footnote diatribe that Piwowar filed back in 2015. But just one of those objections may explain the real source of his continuing unease. Piwowar sees critics of corporate power using the “CEO pay ratio for substantive purposes.”
Those critics are indeed doing just that. This past December, in Portland, Oregon, city officials adopted the first-ever municipal tax on excessive corporate compensation. Companies doing business in Portland that pay their CEOs over 100 times what their median workers make will now face a special surcharge on their taxes due.
San Francisco has begun considering a similar move, as have a number of other cities across the United States. Action is also brewing at the state level. Rhode Island lawmakers will soon be debating legislation that both ups taxes on corporations with wide gaps between CEO and worker pay and gives corporations with narrow gaps preferential treatment in the bidding for government contracts.
The Donald Trump who campaigned for president left the unmistakable impression that groundbreaking moves like these might be right up his alley. On the campaign trail, candidate Trump labeled corporate executive pay an outright “disgrace.”
“You see these guys making enormous amounts of money,” Trump railed. “It’s a total and complete joke.”
Now the joke seems to be on voters who took Trump’s attacks on excessive executive pay seriously. Trump has already issued an executive order that starts the process of undoing Dodd-Frank. And Trump has also nominated an elite Wall Street lawyer, Jay Clayton, to become the new SEC chairman. In short order, Michael Piwowar will be part of an SEC commissioner majority.
That prospect has some Wall Street observers describing Piwowar’s move to reopen the debate over pay ratio disclosure as “likely a first step to killing off the provision that was deeply unpopular with many corporations.”
But Piwowar, Clayton and Trump will need a filibuster-proof majority in Congress to fully wipe out Dodd-Frank and pay-ratio disclosure. We still have time to deny them that majority.