““This is pretty clearly an improvement of the 2011 rule, but the 2011 rule was very weak,” said Marcus Stanley, the policy director at the advocacy organization Americans for Financial Reform. Mr. Stanley said he had hoped that banks would have to hold back pay for more than four years because big losses on bank investments can often take longer than that to materialize.”
“Marcus Stanley, policy director of the public advocacy group Americans for Financial Reform, said that the shift toward taking a long view with executive compensation is anecdotal at best… ‘From our perspective there hasn’t really been a fundamental change,’ Stanley said. ‘What we would want to see is something that moves closer to the old partnership model, where you stay genuinely at risk for a long period of time and where you’re just as sensitive to the downside… as the short-term upside incentives.'”
“Runaway pay, repeated studies have shown, inhibits teamwork, reduces employee morale and productivity, and encourages executives to make dangerous short-term bets. The SEC heard from hundreds of thousands of people about this rulemaking; the messages and comments were overwhelmingly positive, and rightly so.”
“One area where [Treasury Deputy Secretary Sarah Bloom] Raskin has flexed her muscles is in a new drive to restrict executive compensation at the biggest banks… [T]he Dodd-Frank Act required federal regulators to prohibit pay packaged to bank executives that encouraged inappropriate risk-taking… The matter has been revived in recent months, in part because Raskin has made it a priority, pushing it with Lew and the President himself…”
“We’re very pleased that regulators seem to be returning to the drawing board and thinking about a rule that might actually have some impact,” says Lisa Donner, executive director of the liberal Americans for Financial Reform, adding that Raskin has been a “champion” on the issue.
Supporters of a rule that would require public companies to disclose the ratio between executive and median employee pay say the Securities and Exchange Commission should move soon to enact the regulation. “It’s one of the simplest, most straightforward Dodd-Frank rules,” said Marcus Stanley, policy director of Americans for Financial Reform.
Section 953b of the Dodd-Frank Act requires banks and other large public corporations to disclose the pay of their CEOs as a multiple of the pay of their median employees. Of the 400-odd rules mandated by Dodd-Frank, this one is arguably the simplest. But CEOs have lobbied against it both at the SEC and in Congress, and four years after the law was enacted, the Securities and Exchange Commission has yet to put the pay-ratio provision into effect.
“This rule is not a cure-all or a magic bullet,” says Lisa Donner, executive director of Americans for Financial Reform. “It’s relevant information for investors about how a company works. This disclosure is one piece of the puzzle, but it’s useful to have public and standard — or relatively standard — information.”
Americans for Financial Reform, Gina Chon of the Financial Times reports, “will soon send a letter to the agencies – it will also be circulated among lawmakers – urging them to finalise the proposal and strengthen it by not leaving implementation up to a bank’s board or management.” The article quotes AFR’s Marcus Stanley, who describes the executive-compensation provision as “one of the major pieces of unfinished business in Dodd-Frank.”
“Wall Street’s relentless lobbying campaign pressured regulators to dial down some of the reforms, but the overhaul law still has a lot of strength,” Danielle Douglas writes in the July 3rd Washington Post. Her article goes on to quote AFR policy director Marcus Stanley: “The regulators have the statutory authority,” he says. “The question is whether they are going to use that authority.”
“Americans for Financial Reform applauds the introduction of HR 3970, ‘The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act,’ by Representative Lloyd Doggett (D-Texas). Like a companion measure in in the Senate, H.R. 3970 would cap the tax deductibility of CEO pay at $1 million, closing loopholes in order to truly carry out the intent of a 1993 law that originally called for such a cap.”