Senate Democrats Seek "Investigation” Into SEC Pay Ratio Reconsideration, as Comments Reveal Need for Rule Changes
April 1, 2017
In a maneuver aimed at slowing the SEC's reconsideration of Dodd-Frank rules, four Senate Banking Committee Democrats submitted a letter to the SEC’s Inspector General asking for an “investigation” into Acting SEC Chair Michael Piwowar’s reconsideration of both the pay ratio as well as the conflict minerals rules. The Senators, including ranking Banking Committee Democrat Senator Sherrod Brown (D-OH), and Senators Elizabeth Warren (D-MA), Robert Mendendez (D-NJ) and Brian Schatz (D-HI) expressed concern that Commissioner Piwowar’s actions “may lack adequate justification, undermine the SEC’s mission, exceed his authority as Acting Chairman, violate other procedural requirements, and could potentially prove to be a waste of the SEC Staff’s precious time and resources.” The move is clearly intended to hamper the process of gathering input on the rules which the Senate Democrats are concerned could be modified through both staff interpretations as well as a formal rule reconsideration. The Senate Banking Committee is scheduled to vote on the nomination of Jay Clayton as SEC Chairman April 4.
As for the SEC's pay ratio reconsideration, over 160 unique comments on the request were received, with 3,338 identical "form letter" comments submitted in opposition. The U.S. Chamber of Commerce, Business Roundtable, National Association of Manufacturers, the Retail Industry Leaders Association and Society for Corporate Governance also commented with arguments mirroring those included in the Center’s Comments. As for the proponents of pay ratio, a host of social oriented funds and unions, including the AFL-CIO, CalSTRS, Change to Win, Walden Asset Management, and Trillium Asset Management supported the pay ratio with short letters urging the Commission to retain its final pay ratio rule. A typical argument, such as this one from Walden is representative of these comment letters: “We commend the Commission for creating a pay ratio rule that strikes an appropriate balance between providing useful information to investors and providing issuers with flexibility in its implementation. In a global economy with increased outsourcing, comprehensive information about a company’s pay and employment practices is material to investors.” As the Center detailed in its own comments, not only would the pay ratio be misleading, but large investors are not asking companies for such information.