Overpaid CEOs enjoyed a sweet victory in June when the House of Representatives took action to protect them from having to disclose how much more money they make than their workers.
But the celebration didn’t last long. The odds of the Senate taking similar action any time soon were always long. Now, given the health care quagmire, these odds are even longer.
And the clock is ticking. Under the regulation requiring this CEO-worker pay ratio disclosure, large publicly held corporations are due to start reporting their numbers in 2018.
What about non-legislative action? The regulation, which arose out of the Dodd-Frank financial reform law, certainly has plenty of enemies outside the halls of Congress.
One of the most ardent is SEC Commissioner Michael Piwowar, who gets downright apoplectic when speaking about the horrendous burden this “useless” and “special interest-motivated” regulation imposes on corporations — corporations that apparently don’t have the foggiest idea how much they pay their own workers (publicly held firms already report the CEO side of the ratio equation).
When asked about the issue at a July 17 Heritage Foundation event broadcast on C-Span, Piwowar said “first best” would be Congressional repeal — in fact, he exclaimed, that would be “fantastic!” But in this interview and in a speech a few weeks earlier to the Society on Corporate Governance, Piwowar suggested that regulatory actions to delay or water down the regulation might also be possible, depending on how the public weighs in on the question of costs and benefits.
“These taxes are a development that was never considered by Congress or the SEC when Dodd-Frank was passed,” Quaadman noted. And this, he claimed, justified “the Chamber’s longstanding position that the pay ratio rule was never about providing material information to investors.”
Following this perverse logic, the SEC should be prohibited from requiring disclosure of any information that may some day in the future be used for purposes other than investor analysis.
As the anti-disclosure zealots continue their struggle, most executive compensation consultants and legal experts are operating under the assumption that pay ratio disclosure will live to see the light of day.
David Wise, a senior client partner at Korn Ferry Hay Group, told Washington Post reporter Jena McGregor that back in January he thought repeal was a “no brainer,” but now, “the betting man in me says this will be in place next year, only because of the traffic in the queue. You’ve got some big, big trucks in front of you.”
In other words, it’s time for the corporations that have resisted this transparency reform to pull out their calculators.
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