The WSJ reports that three Republican congressman — House Financial Services Committee Chairman Jeb Hensarling, and Reps. Scott Garrett  and Bill Huizenga —  have written to SEC Chair Mary Jo White urging that the SEC stop spending time on the pay-ratio disclosure rules and prioritize completing rulemaking required under the JOBS Act, such as the crowdfunding rules. The Committee is not exactly enamored of pay-ratio disclosure.  In fact, in prior years, the House Financial Services Committee has advanced bills seeking to repeal the pay-ratio disclosure requirement, but Senate Democrats made clear at the time that they opposed repeal.  (See, e.g., my news briefs of 6/24/11, 7/13/11 and 6/20/13.) With Republicans soon to be in control of both the House and the Senate, warnings to the SEC by Republicans congressman suddenly take on a new significance. More to the point, is there another repeal attempt in the works?

You may recall that pay-ratio disclosure provision was included in Dodd-Frank to provide information about disparities between executive and worker pay.  More specifically, the provision required the SEC to amend existing executive comp disclosure rules to require each company to disclose, in a wide range of its SEC filings, including registration statements, annual reports and proxy statements:

  • the median of the annual total compensation of all employees of the company, except the CEO;
  • the annual total compensation of the CEO; and
  • the ratio of the two amounts above.

The SEC proposed rules to implement the provision in September 2013, more than three years after Dodd-Frank was adopted, and final rules still await approval. Even before the rules had seen the public light of day, they were already the subject of extensive discussion and interest group lobbying, as well as the subject of more than 20,000 comment letters. (See my news brief of 9/18/13.).  For a discussion of the SEC proposal, see this CooleyAlert.

The WSJ reports that the letter complained that “[p]rioritizing completion of the pay ratio rule will continue the SEC’s practice of misallocating limited resources to non-essential projects rather than completing rulemakings and other responsibilities central to fulfilling its statutory mission.” According to the WSJ, the congressmen “asked for a detailed description of the funds and man-hours spent on the pay-ratio rule [and] said the SEC need not act swiftly on the rule because the Dodd-Frank law doesn’t impose a specific deadline for its completion, unlike provisions of the JOBS Act.” The letter also reportedly “criticized the SEC for failing to complete other Dodd-Frank requirements aimed at addressing the root causes of the financial crisis, including requirements that the agency scrub references to credit ratings from its regulations. Lawmakers, concerned that ratings firms didn’t adequately judge the riskiness of many securities leading up to the crisis, required federal agencies to stop relying on such ratings.”

Chair White had previously testified to a Senate panel that she hoped the SEC would complete the pay-ratio rules this year.  However, the most recent SEC agenda indicates a delay until October 2015.