SEC finalizing Dodd-Frank CEO pay ratio rule within two months
Under pressure from restless lawmakers awaiting action, Securities and Exchange Commission Chairwoman Mary Schapiro said her agency will implement the federally mandated CEO-to-employee pay ratio disclosure requirement "in the next couple of months."
Schapiro, speaking Thursday at the Society of American Business Editors and Writers, said various issues still need a resolution before the rule is established.
"It seems like a simple thing to do, but it's actually a pretty complex rulemaking and quite prescriptive," Schapiro said about crafting a set of rules. "There are a lot of questions about part-time employees and foreign-based employees and employees of joint ventures and so forth. Those are just a couple of specific issues we have to deal with to get that rulemaking done."
The Dodd-Frank Act mandates that public companies disclose the ratio of CEO pay to the median salary of employees. However, two years after the Act's passage, the SEC has yet to implemented the rule, which business groups oppose and corporate-reform advocates are compelling the agency to pass.
Income inequality, the issue that gave birth to Occupy Wall Street, is a growing concern across the nation.
CEO-to-employee pay ratios ballooned after 1980, a year in which top executives of large U.S. companies made 42 times the pay of factory workers, BusinessWeek estimated at the time. By 2010, CEO pay at S&P 500 companies soared to 343 times that of the median U.S. worker, according to the AFL-CIO.
Sen. Robert Menendez, D-N.J., the author of the Dodd Frank provision, and other members of Congress signed a letter to Schapiro last week, urging the SEC to move forward with the rule-making process.
The letter, referencing data from the Census Bureau, points out that median family income fell over the past decade for the first time since the Great Depression.
Dozens of organizations oppose the provision, including the U.S. Chamber of Commerce, The National Association of Real Estate Investment Trusts and the Securities Industry and Financial Markets Association.
They were among the organizations that signed a letter to Schapiro in January, recommending the SEC hold a roundtable discussion of experts to understand unintended consequences, identify alternative approaches and study the cost-benefit implications of the requirement.
Schapiro said her agency continues to have many meetings with companies and organizations to establish the simplest method of implementing the rule.