H.R. 1135 Repeals Complex and Misleading Pay Disclosure RequirementPosted by on June 19, 2013
Congressman Bill Huizenga joined us to talk about H.R. 1135, the Burdensome Data Collection Relief Act. The bill repeals Section 953(b) of the Dodd-Frank Act that requires all publicly traded companies to calculate and disclose the median annual total compensation of all employees and compare that number to the annual total compensation of the CEO in each SEC filing.
While that sounds simple enough on paper, the real-world implications of Section 953 are substantial.
As the congressman explains, the provision imposes significant administrative burdens on publicly traded companies while yielding little useful information to investors. Because the language does not define “each SEC filing,” companies could be required to calculate this ratio on a monthly or even weekly basis. Further, because the language does not define “all employees,” the calculation could include employees of the company all over the world like Apple’s manufacturing employees in China or a part-time office cleaning crew in Detroit, thus further skewing an already misleading statistic.
In response to a question on Section 953 from Rep. Huizenga on May 16, 2013, SEC Chairman Mary Jo White said, “The complication with that is in the definition of ’total compensation.’ And there is a specific definition of that which applies to when you're disclosing your top executive's compensation. That is, the statutory definition leads to all the other issues you've just teed up in terms of some of those complexities... it's a mandated rulemaking for us.”
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