H.R. 1135 Repeals Complex and Misleading Pay Disclosure Requirement
Posted 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.”
The opinions expressed below are those of their respective authors and do not necessarily represent those of this office.
  • douglas rand commented on 6/24/2013
    The intent of Dodd-Frank remains valid. "the average of all US based employees" would fix the problem. There needs to be much more transparency in public and nonprofit corporations. Why would any congressman be opposed to this?
  • Kevin Ryan commented on 6/24/2013
    Management guru Peter Drucker and many others believe the ratio of CEO pay to average worker pay is a valuable ratio for evaluating a firm. If the concerns were limited to the basis of worker salary and the timeliness of reporting, why was the requirement for reporting removed instead of clarified?
  • Aaron Larocque commented on 6/24/2013
    Hey Bill, Your "solution" seems a bit childish. If its difficult to implement, lets get rid of it all together? It was put in there for a reason. So that investors, the public, and employees can be better informed on how a company spends its money. If I were investing in a company, I would sure want to know if the CEO was being grossly overpaid compared to the average worker. That tells me a lot about whats really going on inside the company. The Honorable Representative Maxine Waters issued a statement during the committee hearing that seemed to go unheard. Instead of outright appealing Section 953(b), add additional language to specify what the definition of 'all employees'. Repealing this section makes it seems like you are bending to the whims of the CEOs who don't want the public to know how much they are really making, and how badly they are sticking it to their workers. You are not doing anything to break the mold of the Republican stereotype. I wanted to find a roll-call to see which if any of my local representatives voted for this so I could send a polite letter, but could not. Take the advice of Rep. Waters gave in her statement, which can be found in the following link
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