Companies asked to report problems adopting pay-ratio disclosure rule

Acting SEC Chairman Michael Piwowar on Feb. 6, 2017, asked U.S. companies to report to the agency their problems complying with the Dodd-Frank Act’s pay-ratio disclosure rule. Sec. 953(b) of PL111-203

“Some issuers have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline,” Piwowar said in a brief statement. Public companies are due to start complying with the rule in 2018 and will have to include the ratio in proxies, annual reports, and registration statements, using 2017 compensation data.

The rule was adopted in August 2015 in Release No. 33-9877, Pay Ratio Disclosure, fulfilling a Dodd-Frank requirement that public companies calculate and disclose the ratio comparing the CEO’s compensation to the median compensation for other employees. The rule amended Item 402 of Regulation S-K. Sec. 953(b) of PL111-203

Piwowar also instructed the SEC staff to “reconsider implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”

He asked that the comments be submitted within 45 days.

Piwowar’s statement marks the second time in the two weeks since he was named acting chairman that he has put a Dodd-Frank Act rule under review. On Jan. 31, he asked the agency staff to review Release No. 34-67716, Conflict Minerals, to see if the companies covered by it need amendments that lessen its obligations. PL111-203

The move also suggests a determination on Piwowar’s part to have the agency move aggressively on its efforts to roll back Dodd-Frank provisions while it awaits the arrival of President Trump’s nominee to run the agency, Jay Clayton. Clayton is still awaiting his confirmation hearing before the Senate Banking Committee. PL111-203

Trump made rolling back Dodd-Frank a campaign promise, and on Feb. 3 he signed an executive order that instructed the secretary of the Treasury to conduct a comprehensive review of financial regulations.

When the pay-ratio rule was adopted, then-SEC Chair Mary Jo White noted the controversy it had engendered, with many public companies objecting to the difficulty they expected to encounter adhering to it. She also said the final rule that was being issued was “carefully considered and calibrated” and offered the companies subject to it “substantial flexibility” in their efforts to follow it.

Still, opponents of the rule did not back down, even as the rule was adopted. For his part, at the time of adoption, Piwowar said the rule offered “no evident benefits.” But the rule’s backers, like SEC Commissioner Luis Aguilar, said the Dodd-Frank executive compensation measures were “intended to promote better shareholder engagement on executive compensation issues.” Aguilar’s tenure on the SEC concluded at the end of 2015.

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