After years of wrangling, a controversial rule requiring thousands of public U.S. companies to share how much more their chief executives earn than their typical rank-and-file employees became effective this year. The so-called “pay ratio” disclosure threatens to put a spotlight on an potentially embarrassing disparity that many companies have long fought to obscure.
The Securities and Exchange Commission finalized the rule in 2015 after receiving thousands of public comments. On Monday, the agency’s acting chairman said it was time to reconsider.
“It is my understanding that some [companies] have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline,” Michael Piwowar, who voted against the initial rule, said in a statement.
“I have also directed the staff to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”
The move by Piwowar is just the latest sign that many of the rules put in place by financial regulators under the Obama administration may now be in danger.
Last Friday, Trump signed an executive order asking for a review of the laws and regulations that govern the U.S. financial system in an opening bid to upend 2010’s financial overhaul law, known as Dodd-Frank. That effort is expected to ignite a protracted battle on whether efforts to rein in Wall Street after the financial crisis when too far — or not far enough.
Forcing companies to disclose the pay-ratio between CEOs and employees was one of the most controversial aspects of Dodd Frank and a victory for Democrats and labor groups. But business groups have argued the rule is cumbersome and unnecessary.
Piwowar, a Republican, was appointed to the agency’s commission by President Obama in 2013 and President Trump appointed him acting chair last month. He replaced Mary Jo White, who stepped down upon Trump’s inauguration. But Piwowar’s time at the top is not expected to last long. Trump has nominated Wall Street lawyer Jay Clayton to head the SEC. The Senate has not scheduled Clayton’s confirmation hearing.