By Benjamin Goad - 09/30/13 02:37 PM EDT
The Securities and Exchange Commission is set to publish a rule requiring companies to disclose how much they pay their top executives, starting the clock on a two-month comment period for the contentious proposal.
Unveiled earlier this month, the draft rule is required under the Dodd-Frank Wall Street reform law. The statute calls for regulations forcing companies to reveal the median income of rank-and-file employees and the salaries of chief executives. Firms would also be required to calculate the pay ratio reflecting the difference between the two figures.
Proponents of the rule argue it would help shame companies that heap exorbitant salaries on their top officers and give lower-level employees more leverage to negotiate for higher pay.
But business groups and banks warn that the cost of complying with the new regulations would be overly burdensome, with some estimates placing the price tag at $100 million for a single multinational firm.
To allay those concerns, the draft regulations call for a flexible approach to calculating the figures, with firms able to choose from a series of alternative compliance options.
“We do not believe that a one-size-fits-all approach would be prudent, given the wide range of registrants and the disparate burdens on registrants based on factors such as their type of business and the complexity of their payroll systems,” they concluded in the draft rule, to be published in Tuesday’s Federal Register.
In the document, the agency agreed with assertions that the cost of implementing the regulations “could be, at least for some registrants, substantial.”
Some firms, the SEC concluded, operate with multiple and complex payroll, benefit and pension systems, including some maintained by third-party administrators. That would make it difficult to accumulate and analyze data. Companies would have to either integrate their systems or consolidate the data manually. Either option would be costly, businesses warn.
The SEC’s analysis, however, did not reach a conclusion about just how expensive that process would be.
“We are … unable to quantify with any precision the compliance costs at this time,” the SEC said.
The agency — which has already received nearly 23,000 submissions from interested parties — is seeking feedback about the costs and benefits of the proposed rule during a 60-day public comment period to begin Tuesday.