Manufacturers Oppose Proposed Pay Ratio Rule

By December 3, 2013Taxation

Yesterday the NAM submitted comments to the SEC in response to their proposed rule implementing the so-called pay ratio requirement that was enacted as part of the Dodd-Frank Act. Manufacturers believe that requiring companies to regularly disclose the ratio of employees’ median pay to the compensation of the company’s chief executive represents a costly and onerous administrative burden on companies that will not produce useful information for investors or advance shareholder knowledge. As the SEC itself points out in the proposal, ““neither the statute nor the related legislative history directly states the objectives or intended benefits of the provision or a specific market failure, if any, that is intended to be remedied.” Yet, despite the absence of a clear benefit, companies will be required to incur significant financial cost, dedicate substantial man-hour resources and overcome numerous administrative challenges in order to attempt to comply with the proposed rule.

Manufacturers are concerned that the idea that a single statistic, like the pay ratio, could be an indicator of a company’s approach to compensation practices, business strategy, or hundreds of other decisions that comprise their business plan is false and overly simplistic – however this reality did not prevent Congress from including this requirement in the Dodd-Frank Act and now manufacturers are facing a compliance hurdle that will put them at a disadvantage to any company that is not required to comply. This issue is just another example of the real and costly impact that the Dodd-Frank Act – enacted to ensure that the financial crisis of 2007-2008 is not repeated –has had on manufacturers who did not cause the financial crisis.

Manufacturers are proud of their commitment to their workforces and want to dedicate resources to competing, growing and investing in their companies, their products and their employees and are concerned about regulatory burdens that will distract them from this mission. Manufacturers hope that the SEC will re-examine this proposed rule and that the Congress will act swiftly to pass H.R. 1135 by Rep. Huizenga (R-MI) to repeal this onerous burdensome requirement and in doing so ensure that manufacturers can spend their time and resources on developing their workforces and their products and not on complying with complicated and costly regulations.

Carolyn Lee

Carolyn Lee

Senior Director of Tax Policy at National Association of Manufacturers
Carolyn Lee is Senior Director of Tax Policy at the National Association of Manufacturers (NAM), the nation's largest industrial trade association. In this role Carolyn is responsible for portions of the NAM's tax portfolio including issues individual marginal tax rates - which are a top priority for small and medium sized manufacturers - as well tax issues relating to investment income, energy efficiency and capital cost recovery.
Carolyn Lee

Leave a Reply