Sen. Robert Menendez, D-N.J., and three other senators called on a major corporate group to reverse its opposition to a provision requiring companies to disclosure the ratio of their CEO pay to the compensation of all their other employees.
Mr. Menendez, author of the provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted last year, sent a letter Wednesday to the Center on Executive Compensation, which is leading the effort to repeal the provision.
In the letter, Mr. Menendez, joined by Democratic Sens. Tom Harkin of Iowa, Sherrod Brown of Ohio and Carl Levin of Michigan, emphasized the importance of pay-ratio transparency to let investors and policymakers better address pay disparity, which they said has skyrocketed.
“There can be no real recovery of our economy without the recovery of the middle class,” they said in the letter to Charles G. Tharp, the center’s CEO. “To rebuild the middle class, we need a better understanding of the factors that have contributed to the stagnation of the wages and incomes of American workers.”
Mr. Tharp said the CEC, comprising more than 325 of the largest U.S. corporations, said the center plans to reiterate its call for the repeal in a response to the senators that the center is still composing.
While he said the center welcomes debate on the advisability of the pay-ratio disclosure, Mr. Tharp said, “I think this specific provision is something that doesn’t help (economic recovery) … It’s not obvious to me how the pay ratio would help stimulate the economy.”
A bill to repeal the provision was approved June 22 by the House Committee on Financial Services June 22 and sent to the full House for consideration. The bill was sponsored by Rep. Nan A.S. Hayworth, R-N.Y., whose media representatives couldn’t be reached for comment.
Michael Passante, legislative counsel to Mr. Menendez, said the senator is gathering support in the Senate to keep the provision and noted all the Democrats on the Senate Banking Committee voted in favor of the provision last year during consideration of the Dodd-Frank bill.
The SEC later this year plans to propose rules to implement the provision with a goal to adopting them by the end of this year, according to an SEC statement.