The Advisors' Blog

– Broc Romanek

Here’s this note from Willis Towers Watson’s Precious Abraham and Puneet Arora:

While much of the congressional focus has been on health care this session, executive compensation has not been totally ignored — it just hasn’t received as much media attention. Below are several pending bills not expected to be enacted this year, but likely to be reintroduced in the 2017-2018 legislative session. Many of the provisions are revenue-raisers likely to remain under discussion regardless of the outcome of the November elections.

– Limiting the 162(m) deduction – Early in the legislative session, Rep. Chris Van Hollen (D-Md.) introduced the “CEO-Employee Paycheck Fairness Act.” The bill would prohibit publicly held companies from using the Section 162(m) performance-based exception to the $1 million pay deduction limit unless the average compensation for U.S. employees exceeds inflation and productivity growth. The “Stop Subsidizing Multimillion Dollar Corporate Bonuses Act,” introduced by Sen. Jack Reed (D-R.I.) and Rep. Lloyd Doggett (D-Texas), would also remove the performance-based exception. In addition, it would make more companies subject to the $1 million deduction limit and broaden the number of employees subject to the limit.

– Amending 409A – Sen. Sheldon Whitehouse (D-R.I.) introduced the “No Windfalls for Bailed Out Executives Act,” which would require repayment of nonqualified deferred compensation for companies that receive extraordinary government assistance. Under the bill, the term “extraordinary governmental assistance” means any grant, loan, loan guarantee or other assistance (whether in cash or otherwise) made by the federal government to or on behalf of an employer that is intended to prevent the employer from becoming imminently insolvent.

– Repealing the CEO pay ratio disclosure – The Securities and Exchange Commission adopted final CEO pay ratio disclosure rules pursuant to Section 953(b) of the Dodd-Frank law earlier this year, but the first disclosures will not be required until the 2018 proxy season. There are a number of pending bills that would repeal this Dodd-Frank requirement.

– Reining in proxy advisory firms – The “Corporate Governance and Reform Act,” introduced by Rep. Sean Duffy (R-Wisc.), would impose new requirements on proxy advisory firms.

After September, lawmakers will focus on the November elections and the lame-duck session following the elections. One-third of the Senate will be facing re-election, which could upset the current Republican majority.