October 13, 2017
A Treasury Department report providing recommendations on how to reform the regulation of U.S. capital markets urged Congress to repeal the Dodd-Frank pay ratio rule in discussing elimination of non-material disclosures, as the Association's Center On Executive Compensation recommended in its comments to Treasury. In discussing pay ratio, the report states, "amendments in Dodd-Frank to the federal securities laws have imposed requirements to disclose information that is not material to the reasonable investor for making investment decisions." It further states:
"Treasury recognizes that the original support for such provisions was well-intentioned. However, federal securities laws are ill-equipped to achieve such policy goals, and the effort to use securities disclosure to advance policy goals distracts from their purpose of providing effective disclosure to investors. If the intent is to use the law to influence business conduct, then this effort will be undermined by imposing such requirements only on public companies and not on private companies. In addition, such requirements impose significant costs upon the public companies that are widely held by all investors."The report also recommended that if Congress determined the disclosure was worthwhile, the regulatory responsibility for pay ratio be moved from the SEC to the Labor Department. Earlier this fall, the Center filed comments with Treasury recommending pay ratio repeal and other changes to Dodd-Frank. Although the report is a positive step, Congress would still need to vote on the pay ratio repeal, which is unlikely prior to year's end. The Treasury report responded to Executive Order 13772 issued by President Trump on February 3, which called on Treasury to identify laws and regulations that are inconsistent with a set of core principles, including "making regulation efficient, effective and appropriately tailored."