US investors fight to preserve SEC rule on CEO pay ratio

More than 100 institutional investors opposed efforts by the US securities regulator to delay a rule requiring companies to disclose a ratio comparing their chief executive’s pay with their workforce median.

Reuters reports that in a joint letter dated Wednesday, more than 100 unions, pension funds, activist investors, state treasurers and consumer advocacy groups urged Acting US Securities and Exchange Commissioner Michael Piwowar not to delay the implementation of the rule.

Piwowar said in February the SEC was seeking comments about whether to delay the rule and whether corporations might be facing any “unexpected challenges” with compliance. The requirement went into effect in January, and the ratio is expected to be disclosed in many companies’ 2018 proxy statements unless the rule is delayed.

The move by Piwowar to potentially delay the rule was one of several actions he has taken since becoming acting SEC chairman in January and represents part of a broader push by President Donald Trump’s administration to scale back or repeal Obama-era rules that Republicans say stifle economic growth.

The CEO pay ratio rule was one of several corporate disclosures mandated by the 2010 Dodd-Frank Wall Street reform law. Championed by groups like the AFL-CIO, it aims to help investors’ better gauge the reasonableness of CEO pay.

“The SEC’s pay ratio disclosure rule is thoughtful, balanced, and carefully crafted to provide companies considerable flexibility and makes accommodations to them in complying with the rule, while giving shareholders valuable new information,” the groups wrote in the letter.

It was signed by people including AFL-CIO President Richard Trumka, Illinois State Treasurer Michael Frerichs, New York City Comptroller Scott Stringer, CalPERS Investment Director Anne Simpson and Trillium Asset Management Senior Vice President Jonas Kron, among many others.

Trade groups like the Business Roundtable and the US Chamber of Commerce have staunchly opposed the rule, saying it provides no material information and may be misleading because of the global nature of many corporate workforces.

The SEC cannot scrap the regulation entirely without going through a rulemaking process, and it does not have the votes to accomplish that now because it only has two sitting commissioners on its five-member panel. The SEC can, however, issue guidance to delay its implementation.

In a letter to the White House last month, the Business Roundtable urged National Economic Council Director Gary Cohn to back efforts to repeal the rule, either through legislation or rulemaking.