OFCCP Affirmative Action Proposal, Pay Ratio to Top Association’s 2012 Agenda, With Health Care to Lead in 2013

March 15, 2012

In the policy briefing, Association Chair Mirian Graddick-Weir noted that it was clear that the membership would make health care the highest priority in 2013, but “most of the various issues are on hold until after the Supreme Court rules and after the elections are over.”  Association CEO Jeff McGuiness said that while there were still plenty of issues on the table for the coming year, much of the activity would be focused on positioning for what will be a momentous year following the elections.

  • Affirmative Action/OFCCP  Association President and General Counsel Dan Yager said the OFCCP’s proposed disability affirmative action rules “are our number one workplace regulatory priority.”  He observed that, according to the CHRO survey, 82 percent of the membership either viewed the proposed 7 percent “goal” as a quota or would treat it as one and that 80 percent believe compliance would be “virtually impossible.”  Vice President, Government Relations Kendra Kosko said “the administration has left very little doubt that it plans to implement these rules this year, believing if they can get these finalized by the end of Obama’s first term it will be very difficult for his successor to undo them if the President is defeated."  Yager noted that the Association has retained David Fortney of Fortney Scott—a former acting DOL Solicitor—to help the Association and other business organizations to lay the groundwork for a potential lawsuit next year if the regulations are finalized and remain in place after the election.  However, he added, “we are fully prepared to sit down with the other stakeholders and seek a consensus.”  Mr. McGuiness thanked the companies who filed comments with the OFCCP supporting the Association’s views. 
  • Executive Compensation  Center On Executive Compensation CEO Charlie Tharp and Center Senior Vice President and General Counsel Tim Bartl led a discussion of the various issues in play this year and next:

    • Pay Ratio  Ms. Kosko noted the strong bipartisan support for pay ratio repeal legislation and said the Center would “continue to develop some momentum by getting a House vote and seeking a Senate sponsor for identical legislation.”  With regard to the SEC rulemaking, she said it had slowed “but ongoing pressure is required, especially in an election year."  The Center, with other groups, has asked the SEC to proceed only after holding fully comparing the costs versus benefits of proposed regulations.  She added: “The most important information we need from you is a reasonable estimate of what it will cost your company to comply.  We are developing a survey on this and strongly urge you to participate.”

    •  Pay for Performance  Mr. Tharp discussed the SEC’s efforts to draft rules requiring companies to expand their proxy disclosures by comparing compensation “actually paid” to the company’s financial performance.  He noted that the “statute is exceptionally vague, but we believe the requirement could provide the SEC with our best opportunity to adopt an alternative disclosure that does a better job linking actual pay to actual performance than existing disclosures.”  He said the Center has engaged with leading compensation consultants and large institutional investors and was developing a standardized pay for performance disclosure that allows companies to tell their pay for performance stories while giving institutional investors information they can use.  Center Vice President, Compensation Practice and Research Ani Huang described discussions we have had with large institutional investors on the issue and said, “All want better pay for performance information and clearer company disclosures, which is very good news.  Our calls so far have confirmed that larger investors generally conduct their own analyses to determine their say on pay vote, rather than relying exclusively on proxy advisory firms.”  Mr. Tharp noted that the Center has also sent a letter to the President of ISS expressing our concerns about the ISS pay for performance analysis and asking for a meeting with him to discuss those concerns and that he hoped a meeting would be scheduled soon.

    • Clawbacks  Mr. Bartl stated that the SEC is expected to propose and possibly finalize implementing rules on clawbacks this year.  He added, "However, after that occurs, the stock exchanges must conform their listing standards to the rules, so this will require a longer implementation period than more conventional rules."

    • Proxy Advisory Firms   Discussing the Center’s efforts to achieve greater oversight of proxy advisory firms, Mr. Bartl observed that the first year of say on pay “reinforced our efforts to address inaccuracies through supplemental materials companies filed with the SEC and the retooling of pay for performance analyses by ISS and Glass-Lewis.”  He noted that SEC Chairman Mary Shapiro has reiterated that the SEC intends to propose rules in 2012 to impose greater requirements on proxy advisory firms, especially with respect to conflicts of interest.

  •  NLRB and Labor Policy  Mr. Yager indicated the legal battle over the so-called “recess appointments” will dominate public headlines but the specific policies would be of greater interest to the Association, most prominently the ambush election rules.  He said the Association was fully engaged in the litigation on this and other NLRB policies, with Roger King of Jones Day serving as outside labor counsel.  We will also be supporting efforts in Congress to rein in the agency, including an upcoming Senate vote to repeal the election rules.  Looking ahead to 2013, Yager said there could be substantial interest in a Republican Congress for overhauling the NLRB and the Association would be very engaged if that were the case.  Ms. Graddick-Weir said the Association would continue to stay actively involved in the labor arena.

  • Wage and Hour/Workplace Flexibility  Mr. Yager noted the continuing explosion of FLSA overtime litigation and admitted that “it will not get fixed this year.”  But the long-term prospects continue to improve as “there is an increasing interest both in the business community and on Capitol Hill and we are even hearing that Democrats on the Hill are very much aware that the law has not kept pace with reality."  He said that if President Obama is re-elected, the Labor Department will likely issue “right to know” regulations requiring written explanations to all exempt employees of the rationale for their exemption, “so let the lawsuits commence!”  Ms. Graddick-Weir said the Association would continue to make the case for reform and “stay engaged with the other side on a potential consensus.”

  • Workforce Development  Jaime Fall, the Association's Vice President, Workforce and Talent Development Policy, said the Congress has the opportunity to decide some issues that could shape the workforce development system for years to come, including the role of employers in job training programs   But he said "there isn’t much hope many of these decisions will be made this session."  He predicted that the only scenario likely to produce action after the election is if one party controls the White House and both houses of Congress.  He said: "Regardless, we will continue to advocate for a strong role for employers in job training programs.  We will work with our education partners to strengthen the ties between educators and employers and continue to move ahead to improve education and training in the U.S. with or without Congressional action."

  • EU Data Privacy  Mr. Yager said the Association would support the efforts of our EU ally BEERG to try to influence a proposal to make the EU rules governing personal data privacy even more stringent.  BEERG will seek to ensure that HR data is subject to separate rules that recognize their distinction from data used in social networking.