business news in context, analysis with attitude

The Washington Post this morning reports that the US Securities and Exchange Commission (SEC) may reconsider the enforcement of a rule established during the Obama administration requiring public companies to disclose the difference between how much senior executives make and the amount paid to typical rank-and-file employees.

The pay-ratio rule was part of the Dodd-Frank legislation that was designed to overhaul financial regulations that some believed led to the economic meltdown of 2008. Now, the Trump administration is pushing for a review of those regulations, with President Trump saying that he would like to upend those rules and relax the regulatory environment. That effort, the Post writes, "is expected to ignite a protracted battle on whether efforts to rein in Wall Street after the financial crisis when too far — or not far enough."

Michael Piwowar, the acting chairman of the SEC who voted against the rule originally, said yesterday that "it is my understanding that some [companies] have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline." And so, he said, he has "directed the staff to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”

The Post writes: "Piwowar, a Republican, was appointed to the agency's commission by President Barack Obama in 2013. President Trump appointed him acting chair last month. He replaced Mary Jo White, who stepped down upon Trump's inauguration. But Piwowar's time at the top is not expected to last long. Trump has nominated Wall Street lawyer Jay Clayton to head the SEC. The Senate has not scheduled Clayton's confirmation hearing."
KC's View:
I have no problem with re-looking at regulations that may in fact be cumbersome for business and may get in the way of actual innovation and efficiency. But I am having a little bit of trouble understanding how this rule is so hard to follow. Isn't it just a matter of math? Maybe companies and executives don't like how the equations add up, and don't want the number to be made obvious. But that's not cumbersome. Just inconvenient.

I always liked this rule. I think it is a perfectly legitimate measurement of corporate philosophy and approach to labor, and it ought to be part of every company's annual report. It ought to be easily available to investors and employees, and I am suspicious of those who think it shouldn't be.