On February 6, 2017, Acting SEC Chairman Michael S. Piwowar announced that the Commission is reconsidering the implementation of the CEO-to-Worker Pay Ratio Rule. The rule requires a public company to disclose the ratio of its median total annual compensation across all employees to the total annual compensation of its chief executive officer. Although the DoddFrank Wall Street Reform and Consumer Protection Act required the rule, the SEC adopted the rule in August 2015, and companies were told to provide the disclosure for their first fiscal year beginning on or after January 1, 2017, Piwowar unexpectedly announced that the SEC was seeking further public input on the merits of the rule before any potential implementation.
Investors and legislators have strongly denounced the delay. On March 22, 2017, a group of 100-plus institutional investors holding a combined $3 trillion in assets under management sent a letter to Piwowar, urging the SEC not to delay implementation of the rule. The letter, signed by representatives of unions, pension plans, asset managers, faith-based funds, advocacy investment organizations, and state treasurers, stated that any delay imposes "significant costs" on investors and noted that "pay ratio disclosure will provide material information to investors who are concerned about CEO and employee compensation and its impact on shareholder value." The investors noted that pay ratio information is material because, among other things, it "enables investors to make more informed decisions on executive compensation, sheds light on the impact of high
CEO-to-employee pay ratios on employee morale," and indicates a company's approach to balancing internal equity and external competitiveness when setting CEO pay targets.
A group of US Senators also sent a letter to Piwowar opposing any delay in the rule's implementation and highlighting the rule's history: "For nearly seven years, investors have been waiting for this disclosure, and now as the first reporting period has just begun, you have inexplicably halted this important investor tool."