Time to Make Corporate Disclosures More Efficient

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The disclosure burden facing public companies is already overwhelming. For example, corporate proxy statements for annual meetings now average between 60 and 80 pages, up from 30 pages a decade ago.[1]

Companies are required to disclose everything from financial performance to executive compensation in these statements, thanks in large part to the Dodd-Frank Act enacted in 2010. The NAM submitted comments to the SEC last year on three of these new disclosures: the “pay ratio” rule and the proposed “pay versus performance” and “clawback” rules. Each proposal is expected to create additional costs and burdens for public manufacturing companies and add to the length of proxy statements without providing any significant benefit to shareholders. Read More

Manufacturers Finally Gain Certainty on Derivatives CTU Fix

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Manufacturers use derivatives to hedge everyday business risks stemming from fluctuations in commodity prices, currency and interest rates. When Congress enacted the financial reform bill (the Dodd-Frank Act) in 2010, they included a provision to exempt manufacturers and other derivatives “end-users” from central clearing requirements, recognizing that end-users do not pose a threat to the financial system and should not be unnecessarily burdened. Read More

Four Years Later and Still Unclear

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This week, at a House Financial Services hearing entitled  “Assessing the Impact of the Dodd-Frank Act Four Years Later,” manufacturers called on Congress to provide clarity for derivatives end-users and to enact legislation that ensures companies are not faced with undue regulatory burdens.

Four years into the rule-making process, regulatory uncertainty continues to harm manufacturers. Despite Congress’ intention to exempt derivatives end-users from costly margin requirements and clearing requirements, subsequent rules implementing Dodd-Frank are unclear and capture manufacturers trying to hedge risk. Tom Deas, Vice President and Treasurer of FMC Corporation, testified that even the rules that supposedly provide end-user exemptions do not provide relief.

When author of the 2010 law and former House Financial Services Committee Chairman Barney Frank was asked about potential updates to his legislation, he responded, “I agree with much of what [Deas] said about the end-user.”  House Agriculture Committee Chairman Frank Lucas mentioned several legislative fixes that the NAM supports saying, “End-users did not create the financial crisis of 2008 and should not be regulated like they did.” We couldn’t agree more. After four years of uncertainty, manufacturers welcomed this bipartisan support and urge lawmakers to act – better late than never.

House Votes to Ease Regulation of Non-Banks Under Dodd-Frank

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The  Dodd-Frank financial reform law enacted in 2010 in response to the crippling financial crisis imposed new regulations on financial markets and companies. Unfortunately, the law’s vast reach sweeps manufacturers into areas of new oversight and regulation, even though manufacturers had nothing to do with the financial crisis.

We have written many times before about the negative impact of Dodd-Frank derivatives requirements on manufacturers, but another provision of the law, which grants broad regulatory authority over companies involved in financial activities, threatens to designate some manufacturers as systemically important financial institutions (SIFIs).

The Dodd-Frank Act created a council of regulators made up of representatives from several different regulatory bodies called the Financial Stability Oversight Council (FSOC) that is charged with identifing existing or emerging systemic risks to the financial system. Section 113 of the Act authorizes the Council to consider whether a nonbank financial company could pose a threat to financial stability and if they determine that there is a threat, then they can subject that company to Federal Reserve supervision and “enhanced” prudential standards – aka more regulation.

The problem is the FSOC looks at a company’s size and scope as part of its determination for what is a nonbank financial SIFI, threatening some large global manufacturers that must engage in lending and financing as part of their everyday course of business. Despite the global reach of these companies, manufacturers did not contribute to the financial crisis and do not engage in the same type of financial activities that banks do, especially not ones that would threaten the financial system. A SIFI designation can bring unnecessary costs for companies that could be put to better use by investing in the business and creating jobs. The NAM wrote to FSOC previously to express concerns with their proposal.

FSOC has already begun to designate companies as nonbank SIFIs, but the House this week adopted an amendment to the financial services appropriations bill offered by Rep. Garrett (R-NJ) to the put an end to this process by ceasing funding for the FSOC designation of non-bank companies as SIFIs. Manufacturers that need to be engaged in financing large projects or machinery as a part of their regular business, should not be regulated as if they were large banks.  The NAM applauds the House action. Global manufacturing companies already face enough challenges remaining competitive internationally, and the NAM will continue to support efforts aimed at preventing unnecessary regulation of these businesses.

Dodd-Frank Relief for End-Users, Still A Focus Four Years Later

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During two separate events today, current and former Senators spoke about making Dodd-Frank derivatives requirements work better for manufacturers, an issue championed by the NAM ever since the financial reform law passed in 2010.

Senator Jon Tester (D-MT), lead cosponsor of a bill (S. 888) introduced by Sen. Mike Johanns (R-NE) to exempt end-users from margin requirements, questioned Federal Reserve Chair Janet Yellen today on the topic of Dodd-Frank in a Senate Banking Committee hearing. Senator Tester asked Chairman Yellen if she is comfortable with exempting end-users from costly homework writing service requirements given the minimal risk they pose to the overall market. Chairman Yellen responded with a succinct “yes,” essentially supporting the legislative fix that Senators Tester and Johanns have been attempting to advance in the U.S. Senate.

Meanwhile, during an event at the Bipartisan Policy Center, Chris Dodd, the former Democratic Senator from Connecticut and lead author of the Dodd-Frank law, spoke about the law as we near its fourth anniversary. Dodd responded to a NAM question on the need to clarify the end-user exemption by saying he “would not be hostile to the idea of revisiting” areas of Dodd-Frank that would make the law “more hospitable to the people of the manufacturing sector.”  Senator Dodd explained that a challenge with doing so continues to be the current political environment, as bringing even at http://samedayessays.org/research-paper/ a narrow Dodd-Frank clarification to the Senate floor may open up the law to other, more substantial, changes seeking to unwind the law.

Still, the NAM will continue to lead the charge in seeking a clear end-user lab report writing exemption from unintended derivatives requirements.

Dodd-Frank Fix in Sight for Manufacturers

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The Customer Protection and End User Relief Act (H.R. 4413) is up for vote in the House on Friday. This bill finally addresses the need to fix the unintended consequences of the Dodd-Frank act on derivative end-users.  Manufacturers use derivatives to stabilize risk and allow for further investment, not to game the system.   Congress knew that when they passed the financial reform law and it is past time that they remedy the significant negative impact on manufacturers.

Dorothy Coleman, the NAM’s vice president of tax and domestic economic policy, sent a letter to the House supporting the passage of H.R. 4413. In the letter, she noted that according to a survey released by the Coalition for Derivatives End-Users, ,“Absent clarification on margin requirements, manufacturers and other end-users that use derivatives to manage risk may be forced to sideline a median of $125 million away from business investment, R&D and job creation.” And even though the legislation comes four years late, the NAM has continued to push lawmakers and to clarify once and for all that manufacturers  should not be subject to unnecessary and burdensome derivatives regulation.

Manufacturers were free of blame for the economic crisis, but unfortunately they will soon receive an unintended punishment unless this issue is resolved. After four long years, manufacturers are hopeful that those in Congress have finally recognized the imminent need for this legislation.  The bipartisan support is there, now is the time for congressional action.

Another Opportunity to Fix Dodd Frank

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Let’s start the year off on an optimistic note…. Here’s to hoping that 2014 is the year that a bipartisan Congress fixes a number of flaws in the Dodd-Frank Wall Street Reform Act.

As we’ve talked about before, Manufacturers, as derivatives end-users, have been working over the past several years to prevent the implementation of the Dodd-Frank Act from having a negative and costly impact on companies that use derivatives to manage risk. On issues like margin requirements, inter-affiliate trades and the use of centralized treasury units, the NAM has fought against new regulations that will create new costs and burdens on manufacturers who utilize derivatives to mitigate commercial risk and not for speculative purposes. The rationale is simple, manufacturers did not contribute to or cause the financial crisis that triggered Dodd-Frank, and as several regulators have stated before Congress, do not pose a systemic risk. Thus, regulators’ efforts should be focused elsewhere.

So far we’ve made some headway… Bipartisan bills (H.R. 634/S.888) moving through Congress would exempt end-users from margin requirements. In fact, H.R. 634, led by Reps. Grimm (R-NY) and Peters (D-MI) passed the House with a huge bipartisan vote last June with only 12… yes, 12 votes in opposition. The Senate companion bill (S.888) has 18 cosponsors from both sides of the aisle and two strong champions in the bipartisan team that is leading the effort – Sens. Johanns (R-NE) and Tester (D-MT). And that’s not all. H.R. 677, the Inter-Affiliate Swap Clarification Act by Reps. Stivers (R-OH) and Fudge (D-OH) was approved by the House Financial Services Committee also with broad bipartisan support.

Earlier this week, Rep. Hudson (R-NC) introduced legislation addressing another problem we have talked about before, the looming change in CFTC’s criteria for companies to register as a swap dealer. The bill, H.R. 3814, would require that the CFTC take an affirmative action to change today’s de minimis level of $8 billion. Without action, the CFTC’s rules currently lower the threshold to $3 billion by 2018. It seems odd to us that the CFTC has seen fit to set a de minimis level at a reasonable level and while doing so then set into motion an automatic drop in the level by over 60% several years in advance. One would think that regulators would prefer to establish the threshold and then go back and reconsider what the appropriate level will be in the economy of some future year. The bill by Rep. Hudson, like the other ones referenced above, is straightforward and a common sense solution to problems arising from the enactment of the massive Act known as Dodd-Frank.

Manufacturers continue to work to encourage members of both parties in both the House and Senate to move these bills in a timely manner.

Manufacturers Oppose Proposed Pay Ratio Rule

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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.

Manufacturers Encourage the House to Take Up Bill Eliminating Pay Ratio Burden

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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.

NAM Leads Push for Solutions for Derivatives End Users

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On Tuesday, June 11th, the NAM along with the Coalition for Derivatives End-Users—of which the NAM is a leading member—organized a fly-in of corporate treasury executives advocating for Senate consideration of H.R. 634/S.888 and H.R. 677. The group, which included nearly two dozen representatives from 15 companies along with other trade associations, spent the day lobbying Senate offices to support the legislation. The first bill, H.R. 634/S.888, would provide a statutory exemption from margin requirements for derivatives end users. H.R. 677 would exempt internal, inter-affiliate trades from being treated for regulatory purposes in the same manner as market-facing trades and also ensure that centralized treasury units can take advantage of the clearing exemption available to non-financial end users when they are hedging commercial risk.

The morning of the event, the lead Democratic Senate sponsor of S. 888, Sen. Jon Tester (D-MT), joined the kickoff breakfast to discuss the status and outlook for the legislation. The Senator was followed by a discussion with is staff from Sen. Mike Johanns (R-NE) the bill’s lead sponsor who joined Sen. Tester’s staff to discuss strategy and the key messages for the day’s events. The group then set off for a day’s worth of visits, meeting with leadership and committee staff as well as staff in offices who have previously opposed this legislation.

Also that morning, the NAM sent to every member of the House of Representatives a coalition letter urging passage of the two bills. The letter was being sent in advance of the anticipated vote on H.R. 634 to be held in the House the following day. Manufacturers are thrilled that the House passed H.R. 634 by a strong bipartisan vote of 411–12. This vote, which is even stronger than last year’s tally of 370–24, sends the bill to the Senate to await action with a clear demonstration of the overwhelming support for this bipartisan legislation.

The NAM will continue to lead the fight to get the Senate to move these two critical bills in the near term. Manufacturers are encouraged by the overwhelming majority in support of the margin bill in the House. And we are committed to keeping up the fight for this exemption which was the clear intent of the authors of the Dodd-Frank Act as the Congressional Record’s reporting of the floor debate makes clear. Simply put, the portions of the bill that sought to regulate speculative derivatives trading were never intended to negatively impact commercial end users who use derivatives to hedge commercial risk. H.R. 634/S. 888 and H.R. 677 will ensure that nonfinancial end users—like manufacturers—who use derivatives to hedge commercial risk do not face increased costs of doing business because they use hedges as a risk-management strategy.

We will continue to press for swift Senate consideration of the H.R. 634/S. 888, margin bill which are now pending and we will continue to press for progress on H.R. 677 in the coming weeks.