Although is questionable whether the Securities and Exchange Commission is subject to President Trump’s executive order calling for a reduction in the number of regulations, the SEC seems to be taking it to heart.
Last week, Congress started the push to roll back the Extraction Disclosure Rule. This week, the SEC is looking to roll back the pay ratio disclosure rule.
The SEC is short-handed. Acting SEC Chair Michael Piwowar asked SEC staff to reconsider implementation of the rule. The pay-ratio rule mandates companies to disclose median worker pay and compare it with CEO compensation. This product of Dodd-Frank is supposed to put pressure on corporate boards to slow pay increases for CEOs.
The argument against is that is a costly to implement and not valuable to shareholders.
Unlike the Extraction Disclosure Rule, the Pay Ratio Rule was not implemented in the window subject to the Congressional Review Act. The SEC cannot rely on Congress to repeal the rule for them.
For the SEC to make changes, it has to create a new rule-making process and open to comments on changing the rule. Repealing the rule would put the SEC at odds with the Congressional mandate in Dodd-Frank to create the rule. That seems an untenable position to take.
Since the SEC is currently subject to three vacancies, it’s unlikely that anything will happen until Jay Clayton is approved by the Senate as the new Chair. That would likely mean two votes in favor of killing or maiming the rule, to one likely opposed.
According to the President’s executive order, the SEC has identified two rules to be repealed. That means it can now roll out a new regulation. Wonder what it will be?