The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s news from this WSJ article:

The U.S. Chamber of Commerce isn’t planning to mount a legal challenge to the Securities and Exchange Commission’s pay ratio rule. The rule, required by the Dodd-Frank Act of 2010, will force companies to disclose the gap between their chief executive’s pay and that of their median employee by 2017. It formally took effect on Monday, after the Securities and Exchange Commission approved it by a 3-2 vote in August. “We decided not to move forward on [the legal challenge],” said Tom Quaadman, senior vice president for Capital Markets Competitiveness at the U.S. Chamber of commerce. The pay ratio rule won’t affect most companies until 2018, Mr. Quaadman said. The political landscape around the rule could also change in Congress and the White House following the 2016 election, he added. Last month, the House Financial Services Committee sent a bill to overturn the rule to the floor. A vote is still pending.

For now, the Chamber said it is more important to move forward with litigation surrounding its challenge of another Dodd-Frank disclosure rule, the one on conflict minerals, he said. The conflict minerals case “has implications for the pay ratio,” Mr. Quaadman said. The conflict minerals litigation focuses on whether it violates corporate free speech rights by forcing companies to declare their supply chains contain minerals blamed for fueling violence in the Democratic Republic of the Congo. A U.S. Appeals Court reaffirmed a ruling in August that struck down conflict minerals disclosure requirements. But the U.S. Securities and Exchange Commission and Amnesty International filed another challenge against the rule this month. Mr. Quaadman said other groups could still move forward.

Since the pay-ratio rule just took effect, that “opens the door” for a legal challenge from someone, said James Barrall, a compensation attorney at law firm Latham & Watkins LLP. Companies are concerned about the rule because finding their median employee will force them to navigate different payroll systems and wage and benefits rules across disparate countries. They also worry that the disclosure will be hard to compare between companies and industries and will be difficult to explain to their workforce. “This is a complex process that will require significant time and resources, particularly as companies work to report this information for the first time,” said Mike Stevens, a partner in law firm Alston & Bird’s employee benefits and executive compensation group.

Also check out this Towers Watson memo entitled “Flexibility at a Price: A Look at the Additional Disclosures Required to Take Advantage of Optional Provisions in the CEO Pay Ratio Rule”. And speaking of the rulemaking process, the SEC’s Chief Economist delivered this speech yesterday about economic analysis for rules…