By Peter Schroeder - 01/19/12 04:02 PM EST
A coalition of business groups is telling regulators to tread lightly when it comes to a regulation that requires companies to publicly compare the pay of their top executives with an average employee.
In a letter sent to the Securities and Exchange Commission (SEC) on Thursday, the group told the regulator that the provision required by the Dodd-Frank financial reform law is an "unnecessary regulatory expenditure."
"It is unclear how the pay ratio disclosure will be material for the reasonable investor," the 23 groups wrote.
"There is a widespread misperception that this information is readily available at the touch of a button," they said. "This could not be further from the truth."
Specifically, some of the nation's largest business lobbies — including the U.S. Chamber of Commerce — are pushing back against a provision of the Wall Street overhaul that forces companies to show how the top executive's compensation compares to the average employee. The piece of the law requires corporations to disclose the pay of the CEO, the median pay of the other employees and the ratio between the two.
Given the frustration about income inequality that has been tapped into by the Occupy Wall Street movement, extreme disparity between the two figures could expose a company to public scorn or political bashing.
But the groups contend that the main problem with the measure is not the publicity it will bring to CEO pay, but rather the headaches in compiling the information. Global companies with tens of thousands of employees would face a large task gathering the data, made more complicated by currency fluctuations, they said.
The groups complained in their letter that this particular provision was included in Dodd-Frank without any hearings to discuss it. They also noted that legislation has been introduced in the House by Rep. Nan Hayworth (R-N.Y.) to repeal that piece of the financial reform package.
They noted that there is no deadline for the SEC to implement this provision, and that the regulator should "resist rushing" to put it in place. Instead, the SEC should consult with experts and stakeholders to determine how best to put the rule in place, and determine the least burdensome way to do it.