Pay Ratio Rule That CEOs Hate Is Getting a Fresh Look at the SEC

  • Acting Chairman Piwowar says review was prompted by complaints
  • Dodd-Frank rule requires comparing CEO pay to typical workers

Michael Piwowar

Photographer: Waldo Swiegers/Bloomberg

A Dodd-Frank Act requirement that companies disclose how top executives’ compensation compares with pay for rank-and-file employees will get fresh scrutiny at the U.S. Securities and Exchange Commission after the agency’s acting chairman requested a review Monday.

Michael Piwowar, who as a commissioner opposed the rule when it was approved in 2015, said he was re-opening public comment on the pay-ratio rule in response to complaints that some companies “have begun to encounter unanticipated compliance difficulties.” The move offers no immediate relief for firms required to comply starting this year, but it could be a first step to ultimately changing the rule, which was included in Dodd-Frank amid claims that executive pay incentives fueled excessive risk before the 2008 financial crisis.

Piwowar, who is serving as head of the commission until President Donald Trump’s permanent pick is confirmed by the Senate, said in an interview Thursday that he may ask staff to review requirements for what information public companies must disclose under the 2010 law. Last week, just days after taking over as acting chair, Piwowar assigned SEC staff to review guidance on a requirement forcing companies to disclose the source of some minerals they use in products.

He and other Republicans have joined business lobbyists in assailing the pay-ratio rule, saying it requires companies to disclose information that isn’t necessary for investment decisions. Under the requirements, which take effect during the fiscal year beginning on or after Jan. 1 this year, companies will have to include the information in registration statements, proxy statements and annual reports, according to the SEC.

No date has been set for a Senate hearing to confirm Jay Clayton, Trump’s pick to chair the agency.

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