Calpers Urges the SEC Not to Delay CEO Pay Rule

  • Acting SEC chair reopened debate over pay-ratio disclosure
  • Investors with $2.5 trillion in assets send letter to SEC

A coalition of institutional investors including the California Public Employees’ Retirement System is calling on a U.S. regulator not to delay the rule for companies to disclose the pay gap between their chief executive officers and rank-and-file workers.

The disclosure would help shareholders assess companies in their portfolios, investors representing $2.5 trillion in assets wrote in a letter Wednesday to Michael Piwowar, acting chairman of the U.S. Securities and Exchange Commission. Jay Clayton, who was picked by the Trump administration to serve as chairman, is scheduled to appear Thursday before the Senate Banking Committee for a hearing on his nomination.

“The SEC’s pay ratio disclosure rule is thoughtful, balanced and carefully crafted,” the letter said. “Delaying the implementation of this rule will do a huge disservice to investors.”

Piwowar last month resurfaced the debate about the requirement when he asked SEC staff to review it and opened a 45-day public comment period. The rule has drawn criticism from companies, which say the pay ratio is costly and burdensome to calculate. Piwowar and Republicans have joined business lobbyists in assailing the disclosure rule, saying it isn’t necessary for investors to make decisions.

Two of the Democratic senators who’ll question Clayton at the hearing are Elizabeth Warren of Massachusetts and Bob Menendez of New Jersey, both of whom favor pay-ratio disclosure. The rule was wrapped into the Dodd-Frank Act amid claims that executive pay incentives fueled excessive risk-taking in the run-up to the 2008 financial crisis.

The rule requires large U.S. public businesses to report the compensation ratio between their CEO and median worker for fiscal years starting on or after Jan. 1. For most companies, the disclosures would begin with their 2018 proxy statements, the letter said.

The pay ratio information “enables investors to make more informed decisions when casting advisory votes on executive compensation,” said the letter from the coalition, including the New York State Common Retirement Fund and a host of smaller groups like the Maryknoll Sisters.

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