Consumer and labor advocates have argued that the Securities and Exchange Commission has delayed the implementation of the provision as it succumbs to pressure from groups that claim the measure is overly financially burdensome for businesses, The Deal reports.
SEC Chairwoman Mary Schapiro told the House Financial Services Committee, which voted to repeal the measure, that the rule’s delay is due to its complexity.
“It is a very, very difficult rule-making,” Schapiro said in April, according to The Deal. “If it was a matter of adding up all the W-2s involving employees and comparing that to the CEO, we could have done it quickly. But it’s quite a prescriptive provision in the law, and there are very extensive record-keeping requirements.”
Schapiro said that the calculation of a vast and diverse number of employees across the world makes the record-keeping even more difficult.
The SEC maintains that the calculations involved in the rule’s record-keeping are complex, but the original mandate to Dodd-Frank added by Sen. Robert Menendez (D-N.J.) was intended to simply demonstrate high CEO pay.
“I wrote this provision so that investors and the general public know whether public companies’ pay practices are fair to their average employees, especially compared to their highly compensated CEOs,” Menendez said in January 2011, The Deal reports. “At a time when companies are laying off workers, employees deserve to know whether their executives are sharing proportionately in any sacrifices.”
The delay, however, holds following a federal court ruling that the SEC had not conducted an adequate cost-benefit analysis for a rule that afforded shareholders easier access to company proxies. Business groups have maintained that the benefits of providing compensation information do not account for the high costs of compiling data.
In March 2011, the HFSC approved legislation sponsored by Rep. Nan Hayworth (R-N.Y.) to remove the provision, which she called a “logistical
“Requiring that these numbers be reported in every disclosure…adds substantially to the cost of compliance with the new law,” Hayworth said, according to The Deal.