I have read several reports quoting Mary Jo White, Chair of the SEC, as saying that the remaining Dodd-Frank corporate governance rulemakings will be out by year-end. Admittedly, the reports aren’t clear as to what Chair White means. Does she mean that the so-called pay ratio rule will be adopted in final form by year-end (in which case the disclosures wouldn’t be required until 2016)? Or that by year-end the Commission will have proposed rules on hedging, clawbacks and pay-for-performance? All of the above? It’s anyone’s guess.
I have also read the daily emails I receive from the SEC entitled “Upcoming Events Update.” (I get several of these “Updates” every day, even though they are identical and don’t seem to have been updated at all. For those of you who don’t get these emails, they purport to announce things like every meeting of the SEC and every speech to be given by Commissioners and Staff members.) For the last month or two, no open meetings of the SEC have been scheduled (and it’s virtually impossible for these rules to be proposed or adopted otherwise than at an open meeting). So when I saw today that an open meeting had been scheduled, I thought that I was about to find out what Chair White means. However, the Sunshine Act notice included in every posting of an SEC meeting indicated that the meeting (to be held on October 22) will address rules relating to credit risk retention by securitizers of asset-backed securities. There’s no reference to compensation disclosure rules of any sort.
The compensation disclosure rules in question were mandated under Dodd-Frank, which was enacted in 2010. So we’re past Dodd-Frank’s fourth birthday and none of the four rules – variously known as the “Four Horsemen of the Apocalypse” (by issuers) and the “Gang of Four” (by the SEC Staff) has been adopted – and three of them have yet to be proposed. Rumor has it that the hedging rule proposal, which would seem to be the most straightforward, was drafted years ago.
There are all sorts of reasons why the SEC might want these rules – particularly the pay ratio rule – to go away; they’ve fed the fires of increased politicization at the SEC and have also fueled some angry speeches by one or two Commissioners. Perhaps some at the SEC are hoping that if the Republicans take the Senate in a few weeks the applicable provisions of Dodd-Frank – or maybe the whole Act – will be repealed. However, the juxtaposition of Chair White’s statements with the lack of any action by the Commission raise concerns that the rules will be proposed at a time when calendar-year companies are gearing up for their 2015 “silly seasons” and won’t have the bandwidth to submit thoughtful comments. I suppose it’s also theoretically possible that the Commission could provide for very short comment periods with the intention of adopting final rules by year-end so that those same companies would have to comply with them during the upcoming silly season. That’s pretty unlikely, but it’s troubling nonetheless.
By the way – at least as far as the pay ratio rule is concerned, never DOES work for me.
I’d like to hear your thoughts on this.