As Predicted – Hitting the Pause Button on the CEO Pay Ratio Rule

Today, acting SEC Chairman Michael S. Piwowar hit the pause button on the unpopular CEO Pay Ratio Disclosure, Reconsideration of Pay Ratio Rule Implementation. We (and many others) had previously observed that if the new administration were to eliminate only one provision of the Dodd-Frank Act applicable to executive compensation, it probably would be the politically motivated pay ratio disclosure. Readers will recall that the SEC adopted the pay ratio disclosure rule in August 2015, on a 3-2 partisan vote, with strong objections from then-Commissioner Piwowar.

Based on comments received during the rulemaking process, the Commission delayed compliance for companies until their first fiscal year beginning on or after January 1, 2017. Issuers are now actively engaged in the implementation and testing of systems and controls designed to collect and process the information necessary for compliance. However, it is my understanding that some issuers have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline.

In order to better understand the nature of these difficulties, I am seeking public input on any unexpected challenges that issuers have experienced as they prepare for compliance with the rule and whether relief is needed. I welcome and encourage the submission of detailed comments, and request that any comments be submitted within the next 45 days.

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.

I understand that issuers need to be informed of any further Commission or staff action as soon as possible in order to plan and adjust their implementation processes accordingly. I encourage commenters and the staff to expedite their review in light of these unique circumstances.

Postponement and revision of the rule seems likely. Now would be a good time to stop spending time and money on this calculation.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.