CEOs ask SEC to repeal Obama rule requiring pay-gap disclosures by companies

Payslip

By Neil Haggerty. 22 August 2017.

The chief executives of leading American corporations are urging the US Securities and Exchange Commission to repeal an Obama-era rule requiring disclosure of the pay gap between companies' top executives and the rest of their employees.

The Business Roundtable, chaired by JPMorgan Chase chief Jamie Dimon, made the request as new SEC Chairman Jay Clayton reviews the pay-ratio rule before it goes into effect next year. "The rule should be repealed because disclosing CEO pay ratios will not advance the SEC's three-part mission," the letter this month said.

The Business Roundtable said if the SEC lets the standard go into effect, it should at least eliminate two key provisions.

The Washington-based group, whose members also include Bank of America CEO Brian Moynihan, Citigroup CEO Michael Corbat, and Wells Fargo CEO Timothy Sloan, noted that the SEC's mission is to protect investors; maintain orderly, fair and efficient markets; and facilitate capital formation.

The Obama-era rule requires a public company to disclose the ratio of the median of the annual total compensation of all employees to the annual compensation of the chief executive officer.

Industry criticism

Industry leaders have criticized the rule, which includes non-US employee salaries and non-full-time employee salaries in the pay ratio calculation.

The Business Roundtable asked the SEC to allow companies to exclude non-US employee salaries from the median employee salary determination. The group said this exclusion will "help to create a more consistent common denominator over time."

The group is also asking the SEC to exclude part-time, seasonal, and temporary workers from the median employee salary determination, saying those figures would have a "disproportionate impact on the CEO pay ratios of companies that employ relative large amounts of those types of workers."

By excluding these employees from the pay-ratio calculations, the Business Roundtable said it would save companies an estimated aggregate of $788 million in compliance costs.

SEC review

Former Acting SEC Chairman Michael Piwowar, who is still a commissioner, initiated a review of the rule in February following "unexpected challenges" that public companies were facing to comply. He asked staff to consider new relief or guidance.

Like many companies, Piwowar opposed the rule when it was adopted under then-Chairman Mary Jo White.

If the rule is approved, companies with a fiscal year starting Jan. 1, 2017, would have to make the disclosures in annual reports to be made public next spring. A company whose fiscal year is to start Oct. 1, 2017, would be required to make their disclosures in December 2018.

Any significant changes to the original rule would likely require another public comment period.