Last week, the House Committee on Financial Services voted 36-21 to advance legislation introduced by Rep. Bill Huizenga (R-MI) to repeal an unworkable –and unnecessary—Dodd-Frank disclosure requirement facing manufacturers. We urge the House to take up this common-sense bill ASAP.
At issue is a misguided provision buried in the 2010 Dodd-Frank legislation that requires public companies to disclose — in every SEC filing — the ratio between the CEO’s pay and the total median compensation for all other employees.
Manufacturers are concerned that accurately calculating the total compensation for all employees will cost countless man hours and hundreds of millions of dollars. For example, a company with global operations will face significant compliance costs determining the pay for employees working in different countries, where the definition of compensation can vary drastically. These employees may also work for a foreign affiliate where the data is not as readily accessible to the parent company.
Adding to manufacturers’ frustration is the fact that it is hard to see what corresponding benefits shareholders will gain from the pay ratio disclosure. CEO compensation is already disclosed, and making comparisons among companies’ pay ratios could be misleading as the numbers do not take into account the varying industries, types of jobs, and diverse geographic regions that create pay differences. The costs of the pay ratio requirement on American manufacturers clearly outweigh the benefits – something that should have been considered before the provision was hastily inserted in the Dodd-Frank Act without so much as a congressional hearing to debate the issue.
The SEC has yet to propose rules implementing Section 953(b), but the NAM wrote to the agency last year requesting that the pay ratio rule be crafted in way that minimizes the regulatory burden on the business community. To read the letter, click here.
The NAM applauds the House Financial Services Committee for advancing legislation to repeal the pay ratio requirement, and urges Members of Congress to vote in favor of the Burdensome Data Collection Relief Act (H.R. 1135) when it is considered by the full House of Representatives, hopefully as soon as possible.