WASHINGTON Feb 20 A top official at the U.S.
Securities and Exchange Commission is urging companies to
consider voluntarily giving shareholders more details on
compensation, rather than wait for the agency to issue
long-awaited rules mandating additional disclosures.
In a statement issued on Wednesday, SEC Democratic
Commissioner Luis Aguilar said shareholders deserve to know how
the pay of lower-level employees compares with a chief
executive's, and how an executive's pay compares with the
company's long-term performance.
He urged companies to start voluntarily making these
disclosures, noting it is simply good governance. His comments
come ahead of the proxy season, in which public companies will
hold their annual shareholder meetings.
"The relative pay of different classes of employees, such as
the ratio between CEO compensation and median pay, can... create
risks to an enterprise, including the risk of employee,
customer, and shareholder discontent," Aguilar said.
"Companies should consider whether additional disclosure is
necessary to enable stockholders to assess such risks and the
manner in which any such risks may be affected by a company's
compensation policies and practices."
The Dodd-Frank Wall Street reform law of 2010 required the
SEC to tighten corporate governance and disclosure rules.
Among some of the key provisions is a requirement that
companies disclose the ratio between a CEO's compensation and
the typical company worker.
It also requires the SEC to enact rules requiring companies
to disclose the relationship between executive compensation and
the financial performance of the company.
The SEC, however, has not yet proposed those provisions amid
strong opposition from companies, which say producing the pay
ratio will be too costly and burdensome.
"Obtaining the data will be difficult and time-consuming as
the definition of compensation among countries will vary widely,
and companies will face difficulties attempting to rationalize
compensation with currency fluctuations," business groups,
including the U.S. Chamber of Commerce and the Securities
Industry and Financial Markets Association, wrote in a letter
Some U.S House and Senate Democrats, meanwhile, have written
letters urging the SEC to act, saying the delays are unwarranted
and that companies are exaggerating the difficulties they will
face in calculating the pay ratio.
"A company's treatment of their average workers is not just
a reflection of their corporate value system, but is material
information for investors," a group of U.S. House lawmakers
wrote to the SEC last year.
It is unclear when the SEC will act to propose the
The SEC is currently divided between two Democrats and two
Republicans after SEC Chairman Mary Schapiro departed the agency
Former federal prosecutor Mary Jo White, who has been
nominated to chair the SEC, has yet to be confirmed by the U.S.
Senate. Little is known about her policy views, including those
on compensation disclosures.
SEC spokesman John Nester said Wednesday that while there is
no statutory deadline to complete the rules, the staff is
"working hard to get a recommendation to the commission for
"The pre-rulemaking comments and meetings with interested
parties have been helpful as we consider a workable
implementation of the congressional mandate," he said.