One of the mandates of the Dodd-Frank financial reform act was for the Security and Exchange Commission to require all publicly held companies to disclose the ratio of CEO pay to the median pay of all other employees. Thanks to heavy corporate opposition, it took more than three years from when Dodd-Franks became law for the SEC to propose such a rule.
That proposal gave in to critics. Under Dodd-Frank, a specific calculation methodology had been prescribed. But the commission made it flexible, letting each company choose a methodology according to its size, structure and how it compensates its employees. Even with this flexibility, the rule was only passed with a 3-2 vote along party lines by the commission's Democratic majority.
The idea behind the pay-ratio rule is to give investors, and the general public, more data about pay disparities at big companies. As might be imagined, this has not struck a harmonious chord in some circles. Others were glad that the rule was seemingly on its way to implementation:
AFL-CIO president Richard Trumka said in a statement that the pay-ratio rule benefits investors “because it shines a light on the company pay ladder for all employees, not just the pay of top executives that is already disclosed under current rules.”
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That was nearly 19 months ago. Still no final rule. And many Democrats are fed up with the delay. With good reason, as Zach Carter
reports, since that is about nine times longer than the usual 60-day public comment period:
"This is just another example of the SEC not acting on the authority we gave them under Wall Street reform," Sen. Al Franken (D-Minn.) told HuffPost in a statement on Friday. "Since the legislation was signed into law, efforts by the SEC to implement these reforms have moved at a crawl."
Fifteen Senate Democrats, including Franken and Sen. Elizabeth Warren (D-Mass.), signed a letter to SEC Chair Mary Jo White in December, calling on the agency to finalize the rule by March 31, 2015. The agency blew through the deadline without bringing up the rule for a vote. Corporate executives from dozens of different industries have pressured the SEC to delay the rule.
Foes of the pay-ratio rule bellyache that it is all about shaming corporate leaders, that the requirement will cost too much to implement and there are other matters the SEC should be focused on. That's why three Republicans, House Financial Services Committee Chairman Jeb Hensarling of Texas, Reps. Scott Garrett of New Jersey and Bill Huizenga of Michigan
wrote their own letter of complaint to the SEC a month before the Democrats wrote theirs.
Sen. Bernie Sanders told Carter:
"At a time of massive wealth and income inequality and when CEOs earn 270 times what their average worker makes, it is time to address the salary structure in America," Sanders told HuffPost. "Not only do we need more information, we need to end corporations counting huge CEO compensation as a cost of doing business and as a tax deduction."
Exactly. And that possibility is what's actually behind opposition to the rule.