SEC Reconsideration of Pay Ratio Contingent on Input From Employers on Implementation Challenges

February 10, 2017

The Association's Center On Executive Compensation will file comments in response to this week's announcement by Securities and Exchange Commission Acting Chair Michael Piwowar (R), opening a 45-day comment period on challenges companies have had in implementing the Dodd-Frank pay ratio requirement for which employer input will be essential.  The Association's Center On Executive Compensation applauded the announcement, with Center CEO Timothy Bartl stating the "Center has always believed that this disclosure is useless and potentially harmful because it purports to communicate information about a company‚Äôs CEO compensation and human resources strategy when in reality it cannot."  In the coming weeks, the Center will lead a major effort to reach out to Center Subscribers and HR Policy member companies to collect updated examples of compliance difficulties and to suggest approaches for addressing them.  Unless the SEC decides to make changes to the pay ratio rules, absent Congressional repeal in 2017, it is questionable whether the compliance date would be postponed beyond the 2018 proxy season, when the first disclosures are required.  The agency's reconsideration of the pay ratio rule is the first of several steps which would be required to take place for the pay ratio rules to be revised.  After receiving comments during the 45-day comment window, the Commission could use the input to craft a set of new revised rules which would require a Commission vote that would send the proposals out for a public comment period.  Based on public comment, the proposal would be revised and then would be approved, again, by a full vote of the Commission.  Meanwhile, it is expected that House Financial Services Committee Chair Jeb Hensarling (R-TX) will introduce a revised version of the Financial Choice Act in the coming weeks, and the Center has urged the Chairman to include pay ratio repeal which was in the 2016 version of the bill, and which also repeals and revises other significant elements of the Dodd-Frank Act.