Some Things Just Don’t Improve With Time

By January 30, 2015Taxation

Some things like wine or scotch improve with time. Bad regulations though, do not. In fact, if anything, more time just makes it clear how unreasonable some ideas really are.

This is why manufacturers applaud Rep. Huizenga (R-MI) for reintroducing “The Burdensome Data Collection Relief Act” H.R. 414 earlier this month. This bill seeks to repeal a particularly unreasonable provision of the Dodd-Frank Act, Sec. 953(b), also known as the “pay ratio requirement.” Already this common-sense bill has 16 cosponsors.

Throughout the Congressional consideration of the Dodd-Frank Act, the NAM urged Congress to focus their efforts on strengthening the U.S. financial system and avoiding new regulations that could be costly and hinder job creation for manufacturers and other nonfinancial companies that had nothing to do with the financial crisis. One example of a costly regulation that raised our concerns is the so-called “pay ratio requirement.” This provision requires companies to regularly disclose the ratio of employees’ median pay to the compensation of the company’s chief executive. This represents a costly and onerous administrative burden on companies that will not produce useful information for investors.

According to the Dodd-Frank law, the Securities Exchange Commission to is responsible for promulgating rules on the implementation of this onerous reporting requirement. In the fall of 2013 the SEC released a proposed rule for public consideration and even as they released their proposal they acknowledged that, “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.” However, 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.

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. Manufacturers pointed out in our comments in response to the release that we agree with the SEC, “that using the ratios to compare compensation practices between registrants without taking into account inherent differences in business models, which may not be readily available information, could possibly lead to potentially misleading conclusions and to unintended consequences.”

The requirement was put into Dodd-Frank without having had the benefit of a full airing and deliberation to consider the cost of collecting this information. Rep. Huizenga’s bill would do the sensible thing and repeal this onerous requirement before companies have to dedicate millions of dollars to complying with a rule that was enacted into law without any consideration. Now is the time, after all, this requirement isn’t improving with age.

Carolyn Lee

Carolyn Lee

Executive Director of The Manufacturing Institute at The Manufacturing Institute
Carolyn Lee is Executive Director of The Manufacturing Institute, the non-profit affiliate of the National Association of Manufacturers (NAM), the nation’s largest industrial trade association. Carolyn drives an agenda focused on improving the manufacturing industry through its three centers: the Center for the American Workforce, the Center for Manufacturing Research, and the Center for Best Practices.

In her role, Carolyn leads the Institute’s workforce efforts to close the skills gap and inspire all Americans to enter the U.S. manufacturing workforce, focusing on women, youth, and veterans. Carolyn steers the Institute’s initiatives and programs to educate the public on manufacturing careers, improve the quality of manufacturing education, engage, develop and retain key members of the workforce, and identify and document best practices. In addition, Carolyn drives the agenda for the Center for Manufacturing Research, which partners with leading consulting firms in the country. The Institute studies the critical issues facing manufacturing and then applies that research to develop and identify solutions that are implemented by companies, schools, governments, and organizations across the country.

Prior to joining the Institute, Carolyn was Senior Director of Tax Policy at the NAM beginning in 2011, where she was responsible for key portions of the NAM’s tax portfolio representing the manufacturing community on Capitol Hill and in the business community and working closely with the NAM membership. She served as the Director of Legislative and Government Affairs at the Telecommunications Industry Association, Manager of State and Federal Government Affairs for 3M Company, and in various positions on Capitol Hill including as Legislative Director for former U.S. Senator Olympia Snowe (R-ME), and as a senior legislative staff member for former U.S. Rep. Sue Kelly (R-NY).

Carolyn is a graduate of Gettysburg College in Gettysburg, Pennsylvania graduating with a B.A. in Political Science. She resides in Northern Virginia with her husband and three children.
Carolyn Lee

Latest posts by Carolyn Lee (see all)

Leave a Reply