Clawbacks, Pay for Performance Rules Remain on SEC's Long-Term Rulemaking Agenda

Executive Pay Legislation and Regulation

The Securities and Exchange Commission's semi-annual regulatory agenda did not include any of the outstanding Dodd-Frank compensation rulemakings for the second consecutive report since President Trump won the White House, including the clawback rule, which had received significant attention in the wake of the Equifax scandal. The Unified Agenda of Regulatory and Deregulatory Actions discloses a non-binding set of regulatory objectives for each agency over the next 6 to 12 months and is updated on a semi-annual basis.  The narrower SEC agenda reflects the philosophy of current Chair Jay Clayton that the agenda should only reflect measures that the agency will act on in the next 12 months.  In a recent speech, he stated that "over the past 10 years, the Commission has completed, on average, only a third of the rules listed on the near-term agenda."  In response, he indicated that the agendas going forward would be shorter, "rooted in a commitment to increased transparency and accountability" and it was his intent to complete the items on the agenda.  Following through with this message, Mr. Clayton reduced near-term regulatory actions by nearly 60 percent to just 26 items in the list released this week.  Notably, as with the list released earlier this year, all the pending Dodd-Frank executive compensation rulemakings are on the agency’s long-term agenda, indicating no action will happen on them in the next 12 months.  Clawbacks have received greater attention in the wake of the recent Equifax data breach scandal.  During a September Senate Banking Committee hearing, Chair Clayton was quizzed by multiple Senators, including Ranking Member Sherrod Brown (D-OH), on whether the SEC would complete the rule.  Thus, it would not be surprising to see action on clawbacks at some point.  Meanwhile, Chair Clayton recently floated the idea of opening the proxy plumbing release which discussed the entirety of the proxy voting system, including significant coverage of proxy advisory firms.  A lighter SEC agenda would perhaps give the agency bandwidth to move on to this important topic.