BNA's very useful Corporate Counsel Weekly (sub req'd) reports that:
Democratic lawmakers March 9 called on the Securities and Exchange Commission to “prioritize” rulemaking for a statutory mandate that would require companies to disclose a ratio comparing the compensation for their chief executive officers with that of employees. In a letter addressed to SEC Chairman Mary Schapiro, the lawmakers said that CEO pay has “skyrocketed,” while that for ordinary workers has “stagnated.”
The Hill further reports that:
The letter said "income inequality is a growing concern among many Americans," and cited press reports that put CEO pay at an average of nearly $11 million a year, more than 300 times the average worker's pay. ... "
Some companies have publicly voiced their concern with the calculation of these figures," it said. "In our view — as well as that of the testimony of Lynn Turner, former Chief Accountant of the SEC — this calculation should not be difficult for any well-organized company."
Stuff and nonsense.
I discuss this Dodd-Frank requirement in my my book Corporate Governance after the Financial Crisis
The rules are unlikely to provide investors with meaningful information. Instead, they are intended to shame corporations by highlighting the disparity between CEO and shop floor employee pay.
I further explain that:
This requirement is going to be hugely burdensome:
[It] means that for every employee, the company would have to calculate his or her salary, bonus, stock awards, option awards, nonequity incentive plan compensation, change in pension value and nonqualified deferred compensation earnings, and all other compensation (e.g., perquisites). This information would undoubtedly be extremely time-consuming to collect and analyze, making it virtually impossible for a company with thousands of employees to comply with this section of the Act.[1]
In sum, this is another pointless and useless but incredibly costly regulation of the sort that Washington has been loading on business on a bipartisan basis ever since George Bush decided to cave and sign Sarbanes-Oxley into law. It ought to be high on the list of rules to be repealed if the GOP gets control of DC.
[1] Warren J. Casey & Richard Leu, United States: New Executive Compensation Disclosures Under Dodd-Frank (August 3, 2010), Mondaq.com, http://www.mondaq.com/unitedstates/ article.asp?articleid=106962. See also Jean Eaglesham & Francesco Guerrera, Pay Law Sparks “Nightmare” on Wall St, Fin. Times, Aug. 31, 2010, at 1 (“The rules’ complexity means multinationals face a “logistical nightmare” in calculating the ratio, which has to be based on the median annual total compensation for all employees, warned Richard Susko, partner at law firm Cleary Gottlieb. “It’s just not do-able for a large company with tens of thousands of employees worldwide.”).
