June 05, 2015
This week, less than 24 hours after outspoken Wall Street critic Senator Elizabeth Warren (D-MA) sent a biting and personal 13-page rebuke to Securities and Exchange Commission Chair Mary Jo White, the Wall Street Journal reported that proposed rules implementing the Dodd-Frank clawback and final pay ratio rules will both be out this Fall. Although it is not clear whether the bitter crossfire between Warren and White and the disclosure of the agency's timing are connected, Senator Warren’s letter appeared to be intended to both accelerate the executive compensation rulemakings and signal to the White House the type of candidates she would prefer to replace outgoing Commissioners Republican Dan Gallagher and Democrat Luis Aguilar, both of whom are expected to leave by year’s end. The Dodd-Frank clawback proposed rule, which the Journal reports is tentatively scheduled for a July 1 Commission vote, will require companies to recoup incentive compensation from executive officers, regardless of fault, if the company files a material restatement based on noncompliance with financial reporting requirements that impacts the incentive compensation. With respect to the pay ratio, Senator Warren's letter characterized White's tenure as SEC Chair as "extremely disappointing" and accused White of intentionally providing "misleading information." Warren alleged that White told her that that there should not be "anything that holds [the pay ratio] up past this fall" although the biannual and non-binding OMB Regulatory Agenda released the same day indicated an April 2016 completion. SEC officials subsequently confirmed that White is still committed to completing the pay ratio rule this fall. In response to the Warren letter, White released a statement accusing Warren of intentional "mischaracterization" of her remarks while, as reported by Politico, the White House indicated that it was "not happy" with the tone and content of Warren's letter. The public spat over the SEC's leadership and priorities under White comes weeks after the agency proposed rules implementing the Dodd-Frank pay for performance, and the agency just this week released a pay ratio analysis for comment (see related story below).