Groups on the left are putting pressure on federal regulators to issue a controversial regulation intended to reveal the earnings gap between CEOs and employees.
Many of those advocates fear regulators will bend to pressure from business groups and water down the final rules, perhaps by adding language that could help companies avoid the disclosure.
“Industry is pushing more relaxation wherever it can,” said Bartlett Naylor, a financial policy advocate at Public Citizen who attended the SEC meeting. “A couple of words can undermine an entire policy.”
The compensation rules stem from a provision in the Dodd-Frank reform law that requires companies to disclose the median pay of their workforces, and how it compares to the earnings of their CEOs.
The rules come from a subsection of Title IX within Dodd-Frank that deals with executive pay and accountability.
Labor unions have strongly backed the provision, arguing the disclosure is needed to shame executives into raising the wages of their workers.
Vineeta Anand of the AFL-CIO, who organized the meeting on July 1, told The Hill that “company performance, employee morale, loyalty all suffer when the gap [in pay] is very steep.”
Representatives from the union and eight other groups spoke with the SEC’s corporate finance office and other key regulators about that part of the law, as well as at least four other Dodd-Frank provisions that are in various phases of the rule-making process.
They hope to counter industry trade groups and corporate executives, who have denounced the policies as burdensome in a flurry of meetings and comment letters.
Business groups have repeatedly argued that the pay ratio information is burdensome to collect and is of no use to investors, and thus should not be mandated for release.
In one letter to the SEC, the Society of Corporate Secretaries wrote that a ratio of executive pay and a company’s employees will “neither be material to the investment decisions of reasonable investors nor provide any other benefits to investors.”
Liberal advocates argue that the agency's proposed rule, which counts part-time and non-U.S. employees as part of a company's median workforce, helps to provide a complete picture of a firm's source of labor. Businesses disagree, and are asking the SEC to only count full-time and U.S. workers in the disclosure requirements.
Sen. Robert MenendezRobert MenendezTaiwan deserves to participate in United Nations The way forward on the Iran nuclear deal under President Trump Corruption trial could roil NJ Senate race MORE (D-N.J.) inserted the pay ratio provision into the Dodd-Frank legislation as it moved through Congress, and has written multiple comment letters urging the SEC to swiftly implement it.
The Chamber of Commerce and other business groups have fought the executive pay ratio policy from the start.
“It’s really a political talking point that’s managed its way into legislation,” said Tom Quaadman, vice president of the capital markets center for the Chamber of Commerce, during a 2012 effort by business groups and congressional Republicans to repeal it.
A report released last month by the Economic Policy Institute, a left-leaning Washington think tank, found that top executives at the nation's 350 top publicly traded firms are getting paid nearly 300 times that of the average worker, earning an average of $15.2 million each in 2013.
“The fact that CEOs make almost 300 times what workers make should set off alarms," said institute President Lawrence Mishel about the report.
"CEOs are making more and more while workers are making less — even when worker productivity is skyrocketing,” he said.
Regulators often meet with interested parties — and have held several meetings since proposing the executive-to-worker pay rules last fall — but are not able to give feedback to advocates or shed light on the process.
The SEC has set an October deadline to finish several regulatory priorities, including the executive pay ratio rules. Several other contentious rules, such as a proposal to curb incentive-based pay for bankers that might encourage risky financial behavior, are hanging in the balance.
Officials at the SEC have met with the American Benefits Council, the Center on Executive Compensation, PNG Financial Services Groups and the Corporate Directors Forum about the executive compensation rules, making the July 1 meeting the largest showing of public advocates so far.
Anand, of the AFL-CIO, said corporate leaders “would rather that this would not happen.”
“But this is the law,” she said, “and it’s going to happen.”