On August 5, 2015, the Securities and Exchange Commission (SEC) voted 3-2 in favor of a final rule requiring public companies to disclose CEO pay as a multiple of the median-paid employee. The rule was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, but languished at the commission for five years.
Commissioner Michael Piwowar voted against adoption of the final rule. He said “ideologues” and “bullies” pressed the SEC to carry out this mandate.
Public Citizen members and supporters appealed to the SEC to adopt this rule, which was mandated in 2010. (Yes, laws from Congress often require agencies to translate them for industry before they become enforced, but the time lag on this rule was ridiculous.) To achieve the success of the SEC following-through with a congressional mandate, Public Citizen worked in concert with the AFL-CIO, AFSCME, the Institute for Policy Studies, As You Sow, the Teamsters and other members allied with Americans for Financial Reform. We count, apparently, among the “bullies” that Commissioner Piwowar complained about. Our chief weapon — the written and spoken word (with an occasional Facebook graphic).
The rule itself is intended to confront economic bullying, namely, the diversion and concentration of corporate income into the bank accounts of senior managers. The SEC’s final rule final rule harnesses shareholder pecuniary interests to help arrest the runaway CEO pay that’s part of yawning income inequality in America. The SEC’s important action drew front page media attention in the Washington Post, stories in the Wall Street Journal, New York Times, CBS, Fox, etc.
With the new SEC rule in place, investors can better determine if CEO at company X is overpaid compared to the CEO at peer company Y.