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GOVERNANCE

Investor group urges SEC not to delay CEO pay ratio disclosure rule

A group of more than 100 investors and investor organizations representing $3 trillion in total assets is urging the Securities and Exchange Commission not to delay a rule requiring disclosure of a company's CEO-to-worker pay ratio.

“The SEC's pay ratio disclosure rule is thoughtful, balanced and carefully crafted to provide companies considerable flexibility, and makes accommodations to them in complying with the rule, while giving shareowners valuable new information with which to assess companies in their investment portfolio. Moreover, the SEC's rule encourages companies to offer additional context for their pay ratio disclosures,” the group said in a Wednesday letter to acting SEC Chairman Michael S. Piwowar.

The letter comes a month after Mr. Piwowar called for reconsideration of the rule, which requires disclosure of the ratio of a CEO's pay to that of the median employee.

In a Feb. 6 statement on the SEC's website, Mr. Piwowar said the rule continues to cause compliance issues and that the SEC would seek public input “on any unexpected challenges…and whether relief is needed,” over the next 45 days. Mr. Piwowar added that he asked the SEC's staff “to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”

The already-delayed rule, created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is currently scheduled to take effect in companies' first fiscal year beginning on or after Jan. 1, 2017, which would mean most companies' 2018 proxy statements.

The letter's signatories include the $313.2 billion California Public Employees' Retirement System, Sacramento; $82.7 billion Minnesota State Board of Investment, St. Paul; $186 billion New York State Common Retirement Fund, Albany; $170.6 billion New York City Retirement Systems; $112.4 billion, Washington State Investment Board, Olympia; Aberdeen Asset Management; Standard Life Investments; Legal & General Investment Management; AFL-CIO; and various state treasurers.

“It is a shame that the SEC is reconsidering its implementation of the 'pay ratio' disclosure requirement,” said Richard L. Trumka, president of AFL-CIO in an emailed statement. “Seven years is way too long to wait for a common-sense rule that gives investors material information and increases transparency. As shareholders, we deserve to know whether CEO pay is out of balance in comparison to what a company pays its employees.”

According to the labor union, CEO pay at S&P 500 index companies is 335 times the pay of non-supervisory U.S. workers on average.