Ignorance isn’t only bliss: it’s maintaining the integrity of financial capitalism, according to a Republican member of the Securities and Exchange Commission.
In casting a vote against the final CEO pay ratio disclosure rule approved by the SEC on Wednesday, Commissioner Michael Piwowar said the regulation “unambiguously harms investors” and described the push for it as “no surprise to anyone familiar with the use of Saul Alinskyan tactics by Big Labor and their political allies.”
“Nearly fifteen years ago, Big Labor supporters published a book called Working Capital: The Power of Labor’s Pensions that contained a strategy to re-make the capital markets with a so-called ‘worker-owner’ viewpoint,” he explained. “The worker-owner approach would aim to ‘inject workers’ welfare, broadly understood, into investment priorities’ and depart ‘from conventional investment wisdom by expanding the options, methods, and principles that guide capital allocation.’”
Piwowar also bemoaned how public comments–“over 70,000 form letters”–that had called on the SEC to shed light on inequality were “generated by an organization that receives funding from billionaire George Soros.”
He described himself and the other Republican Commissioner, Daniel Gallagher, as “standing up to the Commission’s bullies by voting ‘no’ on ‘name and shame.’”
The rule–which the SEC was ordered to implement by Congress in 2010 after the passage of the Dodd-Frank financial reform bill–will force publicly traded companies to disclose the ratio of pay between their CEO and other employees. The New York Times’ “DealBook” said that it “gives companies considerable flexibility in calculating the pay gap, suggesting that the SEC was receptive to the concerns about cost and complexity that corporations expressed.”
Despite the adoption of the regulation being mandated by law, Gallagher said the Commission was under no pressure to act on Wednesday.
“As an initial matter, we did not have to take up this rule today. Section 953(b) of Dodd-Frank does not have a statutory deadline,” he remarked.
In his dissent, Gallagher also echoed some of Piwowar’s arguments, although he said he would have approved of a version of the rule that limited ratio calculations to full-time US employees.
“I recognize that Section 953(b) of Dodd-Frank is the law of the land,” he explained. “And so, when it was unfortunately prioritized back in 2013, I engaged the issue.”
He did note, however, his opposition to the initial pay ratio disclosure mandated by Dodd-Frank, remarking that “addressing perceived income inequality is not the province of the securities laws or the Commission.”
“The release does an impressive job of creating out of whole cloth a rationale for this rule: that it could help inform investors in their oversight of executive compensation, including say-on-pay votes,” Gallagher noted. “But, to steal a line from Justice Scalia, this is pure applesauce.”
Defending pay ratio disclosure, Democratic SEC member Kara Stein said the rule “should provide a valuable piece of information to investors and others in the marketplace.”
“It will allow investors to evaluate how this metric changes from year to year for individual companies,” she remarked. “It also will provide valuable information to investors about how a company manages human capital.”
Liberals have long been calling for the SEC to approve of a final CEO pay ratio disclosure rule. In June, Sen. Elizabeth Warren (D-Mass.) complained that one did not appear forthcoming until April 2016, and said SEC chair Mary Jo White had given her “misinformation” when the key regulator said a rule would be forthcoming in the fall.
“I cannot understand how and why this rule has been delayed for so long,” Warren said.
