In his statement, Aguilar said that it would be a sign of good governance if companies voluntarily started making disclosures of salary packages, because shareholders deserve knowledge of how the pay of lower-level employees compare with that of the CEO, or how long-term performance of companies tally with executive pay packages.
Aguilar’s comments, made just before the Proxy season when companies hold their annual shareholder meetings can compel some companies to make additional disclosures rather than have SEC issue a rule about that.
Aguilar said, “The relative pay of different classes of employees, such as the ratio between CEO compensation and median pay, can… create risks to an enterprise, including the risk of employee, customer, and shareholder discontent.”
While such disclosures of salary packages and relation to long-term company performance had been one of the key provisions of Dodd-Frank reforms, the SEC has refrained from issuing the rules in the face of opposition from powerful lobbies and companies who say revealing the pay ratio would put big burdens on companies.
Last year, business groups had sent a letter to the SEC remarking, “Obtaining the data will be difficult and time-consuming as the definition of compensation among countries will vary widely, and companies will face difficulties attempting to rationalize compensation with currency fluctuations.”
SEC spokesman John Nester said that there is no statutory deadline for issuing the rules to force revealing salary packages and comparisons, but the SEC staff is “working had to get a recommendation to the commission for consideration.”
Last year, a group of Democrats from the U.S. House and Senate had urged the SEC to hasten the process, observing that “a company’s treatment of their average workers is not just a reflection of their corporate value system, but is material information for investors.”
However, currently, after SEC Chairman Mary Schapiro left the agency, the SEC has two Democrats and two Republicans on board – locked in a stalemate.