Rep. Nan Hayworth, M.D. (R-NY), Member of the House Financial Services Committee, introduced a bill today to repeal Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Burdensome Data Collection Relief Act will abolish the "Chief Executive Officer (CEO) Pay Ratio" disclosure requirement, which places an unnecessary logistical and cost burden on all publicly traded companies, not just financial institutions. Repeal of the disclosure requirement will enable businesses to direct those resources for investment and job creation.
Hayworth stated, "The unemployment rate has drifted near or above 9 percent for the past 22 months and Americans are desperately seeking work. At a time of high unemployment and economic uncertainty, we must not put new obstacles in the way of hiring and recovery. The Dodd-Frank Act disclosure requirement will be costly and time-consuming for employers, will serve no useful purpose for company shareholders, and will divert resources from job creation."
Section 953(b) of The Dodd-Frank Act in effect requires every public company to disclose in every U.S. Securities and Exchange Commission (SEC) filing the ratio of the median annual "total compensation" of all company employees to the annual "total compensation" of the CEO. For most companies this will create a logistical nightmare of having to apply complex calculations to every single employee. Determining the median salary requires computing the salary of every employee, potentially in every subsidiary and in every foreign country, and identifying the exact individual with an equal number of higher- and lower-paid colleagues.
Requiring that these numbers be reported in every disclosure, not just annual proxy statements, also adds substantially to the cost of compliance with the new law.
Hayworth continued, "SEC filings serve an important and useful purpose: providing investors or potential investors with material information about public companies. Existing law already requires public companies to disclose extensive information regarding executive compensation. Placing additional paperwork burdens on our public companies to generate information that is immaterial to investors and shareholders will squander resources that could be used for job creation. The disclosure provision in Dodd-Frank was ill-conceived and poorly written, and it will do more damage than good. The Burdensome Data Collection Relief Act repeals an expensive and unnecessary requirement, and frees funds to create the jobs that are our nation's first priority."