- Pay Ratio Proponents. The typical submission from proponents, which include labor unions, pension funds and smaller investors, is brief—less than five pages—praising the pay ratio as another "additional metric to evaluate say-on-pay votes and other executive compensation issues.” The letters also assert that the pay ratio will help address income inequality, even though no sound support is provided in their comments. These letters, such as the one from the AFL-CIO, do not provide any context around how they will use the pay ratio while others go so far as to implore the SEC to put the proposed rule into effect as soon as possible. Interestingly, CALPERS supported the expansive pay ratio disclosure and including all global employees in the calculation, but it also supported several of the Center's suggestions, such as allowing a one-year look back period for identifying the median employee as well as the annualization of partial-year employee pay.
- Pay Ratio Opponents. Comments from opponents make several consistent suggestions regarding the need for greater flexibility under the rule and question the SEC's estimated costs of implementation in the proposed rule. The U.S. Chamber focused on emphasizing the procedural requirements the SEC must meet in order to proceed with a final rulemaking. The Business Roundtable's comments echoed many of the Center's concerns, including that the ratio only include U.S. employees and be "furnished" information, and noted the absurdity of the rule. The National Association of Manufacturers questioned the SEC's cost-estimate of $72 million, calling the figure "grossly underestimated." Over two dozen individual companies and businesses also submitted letters discussing how the rule would specifically impact them, with some including cost estimates.
Volume, Depth of Pay Ratio Comments Highlight Issues the SEC Must Resolve in Final Rule
Published on:
Authors: Timothy J. Bartl
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The comment period on the SEC’s proposed pay ratio rule closed last week, and the more than 116,000 submissions show that proponents are largely satisfied with the rule while opponents have grave concerns. Predictably, comment submissions fall in two camps. Proponents of the rule include unions, activist and social investors, liberal politicians and academics, social activists, and consultants who see a new business opportunity compiling the data. Opponents include businesses and associated business groups, such as HR Policy Association and its Center On Executive Compensation.
The Commission will now begin reviewing all the submissions for the purpose of formulating a final rule and conducting a final economic analysis of the effects the rule will have once implemented. Additional submissions will continue to be accepted and reviewed by the Commission for the foreseeable period, ending within a reasonable time frame before the release of a final rule.
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