As companies continue to hope the CEO pay ratio disclosure effective date for 2018 proxies will be delayed by the Securities and Exchange Commission (SEC), here are the latest clues we have on the agency’s direction.
First, the SEC recently updated its list of regulatory initiatives that it plans to complete during the second half of 2017, and moved the following Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) provisions from this agenda to the long-term agenda: Pay versus performance disclosures (Sec. 953(a)); mandatory clawbacks for financial restatements (Sec. 954); hedging policy disclosures (Sec. 955); and compensation prohibitions for covered financial institutions (Sec. 956). This likely means we will not see a short-term move to finalize any of these proposals, as long as the Republican party holds a majority at the SEC.
As for the CEO pay ratio, it is hard to read much into this agenda, except that the SEC does not say it will reopen the regulatory process. However, this does not in any way indicate whether the SEC has taken off the table the chances for a delay in the effective date.
(For more information, see “Several hurdles may prevent the SEC from delaying the CEO pay ratio” Executive Pay Matters, June 1, 2017).
Second, one required step toward a potential delay would be the SEC having a sufficient number of commissioners to constitute a quorum. After a spate of press reports in mid-July that Hester Maria Peirce would be nominated by the White House to be a Republican appointed member of the SEC, that nomination has not yet been offered. The cause of the delay is not clear, but we now wonder if her nomination is imminent, and even if it happens soon, whether the Senate would take it up any time before September.
Finally, last week SEC Chairman Jay Clayton, in an appearance at the U.S. Chamber of Commerce in Washington, addressed the CEO pay ratio regulations. He stated that the regulations “are on the books. We recognize the compliance date is coming and that we are mindful of looking at all of our rules.” So, although the SEC has not signaled any definitive actions, there is still some room for quiet optimism for those seeking a delay.
Steve Seelig is a senior regulatory advisor for executive compensation at Willis Towers Watson.
Puneet Arora is a regulatory advisor in Willis Towers Watson’s Research and Innovation Center.