March 17, 2015
Public Citizen Applauds U.S. House Call for CEO Pay Disclosure Rule
Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division
Note: Today, 58 members of the U.S. House of Representatives sent a letter calling on Securities and Exchange Commission Chair Mary Jo White to finalize a rule requiring that public companies disclose CEO pay as a multiple of the median-paid employee at the firm.
Five years after Congress approved this simple disclosure requirement, it is inexcusable that the U.S. Securities and Exchange Commission (SEC) has not taken action and has continued to deprive investors and the public of this valuable information.
Senate and House members have written letters on this issue before. Many have pressed SEC Chair White to finalize the rule when she has appeared in congressional hearings. Two of the SEC’s five commissioners have publicly declared support for the proposed rule. Ideally, Chair White will understand that the signatures of 58 elected representatives ? whose collective districts include 41 million American citizens ? constitute more than a nudge.
Among the 400 rules that regulators must implement from the Dodd-Frank Wall Street Reform and Consumer Protection Act, this one is the simplest. There is no legitimate reason for the SEC to ignore its statutory mandate to implement this law.
More than 100,000 commenters have asked the SEC to finalize the law. Generally, they argue that it will be a simple tool to help them determine whether a CEO is fairly paid, relative to peer companies with like employment figures. As the congressional letter explains, firms with overpaid CEOs suffer morale and productivity problems.
Major companies have lobbied against the disclosure, arguing that calculating this number is difficult. Exxon claimed that it would cost $100 million to identify the median paid employee among its 79,000 workers. That’s a ludicrous, incredible claim, an overt attempt to distort the cost-benefit analysis that the SEC performs when adopting rules.
CEO pay at some firms has become thinly disguised looting of shareholder savings. Naturally, some industry leaders object even to modest reform efforts. But the SEC, charged with protecting investors, should not be an ally to this pillage.
In addition to members of Congress, CEO pay disclosure is supported by groups such as AFL-CIO, Americans for Financial Reform, Institute for Policy Studies, Teamsters and Public Citizen.