They’re in! The financial industry’s comments have been submitted and collected on one of the biggest rulemakings concerning Wall Street pay—Section 956 of The Dodd-Frank Wall Street Reform and Consumer Protection Act—Incentive-Based Compensation Arrangements.
The comments echo a familiar theme from the financial reform legislative fight of last year: whatever you do, just don’t involve the financial services industry in your new regulations.
The financial industry seems to believe that it should be the exception to the rule.
And since the main purpose of the rule is to curb Wall Street’s excessive pay practices– clearly it needs to cover the bulk of the financial industry. The Dodd-Frank legislation intended this rule to prohibit executives from repeating the inappropriate risks that prevailed before the 2008 financial crisis and led to the crash.
When implemented, the proposed rule will require financial institutions to disclose their incentive-based compensation arrangements to federal agencies and, at larger companies, require a mandatory deferral of at least 50 percent of executives’ incentivized pay for three or more years.
In response to the proposed rule more than 10,000 public commenters flooded the websites of the seven federal agencies responsible for drafting the rule to give their two cents on how federal agencies should curb Wall Street’s excessive pay.
Public Citizen sifted through these comments and identified 30 industry organizations attempting to weaken the rule, 24 of which submitted written comments and 6 that met with federal staff.
Upon examination, it is crystal clear that these commenters have the potential for undue influence. The 31 groups spent nearly $243 million lobbying on financial services issues and $46.7 million contributing to campaigns in 2010 election cycles. In part, that money has paid for at least 712 lobbyists, including 454 who have reported contacting at least one of the seven agencies responsible for drafting the rule.
Here’s some of what the 24 commenting companies and industry representatives suggested to federal agencies on Incentive-Based Compensation Arrangements in their comments:
17 out of 24 plead that their company or industry should simply not be included in the rule. Some proposed legal challenges to the rule, while others assumed the inclusion of their company to be “an unintended consequence.” A few others asked for special carve outs for whole classes of job titles or exclusions of certain types of incentive-based pay.
15 out of 24 explain that the rule is too “burdensome,” “prescriptive” or “one-size-fits-all.”
13 out of 24 believe that the rule is essentially necessary because the private sector inherently accounts for good decisions and safeguards in conducting business. (If it did, Section 956 would be neither here nor there.)
11 out of 24 companies called for the total elimination of the mandatory deferral requirement.
8 out of 24 point out that the industry’s inability to attract and retain top talent with competitive compensation plans will create a brain drain that’s “as devastating as excessive risk.”
4 out of 24 commenters demanded that the regulation be downgraded from a clear rule to a “guideline” so that companies have the option of voluntarily abiding.
Representatives of the financial services industry clearly seek to render Section 956 irrelevant by limiting the scope of its coverage and by gutting its enforceability. Their comments serve as a window into the types of messages being funneled to government officials by the commentators’ 712 lobbyists and $243 million in lobbying expenditures.
Without a doubt, Wall Street is flexing its financial muscle to rebut the 10,000 or more public comments supporting and bolstering the pay incentives proposed rule.
However the public’s voices should be deemed more important than industry dollars; and it’s time for federal agencies to acknowledge that Main Street’s two cents should weigh more than Wall Street’s $243 million.
We urge them to make the rule to rein in Wall Street pay as comprehensive as possible. Read our new report, “Just Not Us,” for more information.