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Policy & Politics

December 13, 2016

Pay ratio disclosure rules finally approved. 

            The controversial “pay ratio” rule has finally been approved, requiring companies to disclose the ratio between the pay for the top executives and the median employee. Company executives have argued that this number is hard to calculate and misleading. Investor groups have responded that if the company knows how many employees it has and how much it is paying them, it is not a difficult calculation, and that investors are sophisticated enough to understand the significance of the disclosures.

            Companies are required to report this information in their proxy, registration and information statements, as well as annual reports for the first fiscal year beginning January 1, 2017. The rule is mandated by the Dodd-Frank law and was adopted in August 2015.

Vanguard founder John Bogle supports better disclosure of corporate political contributions and better oversight by shareholders. 

            John Bogle calls on institutional shareholders to insist on better disclosure: “America’s institutional investors must stand up to the Supreme Court’s misguided decision and bring democracy to corporate governance, recognize conflicts that arise from the interlocking interests of our corporate and financial systems, and take that first step along the road to reducing the dominant role that big money plays in our political system.”

            Bogle spoke with members of the Corporate Reform Coalition in October, reiterating his belief that shareholders, as owners, are entitled to the information about how corporate money is used to influence elections and politicians.1

Senator Elizabeth Warren calls for removal of Securities and Exchange Commission Chair.

            In a letter to the President, Senator Elizabeth Warren, an outspoken critic of Wall Street, the financial services industry, and the SEC, asked that Mary Jo White be replaced as Chair. (As an independent commissioner, she cannot be removed, but the title and authority of the Chair position can be reassigned by the President.) 

            “For years . . . Mary Jo White has refused to develop a political spending disclosure rule despite her clear authority to do so, and despite unprecedented and overwhelming investor and public support for such a rule,” Warren wrote in a letter to Obama. She claimed that with this failure and others, including missed deadlines for rulemaking under Dodd-Frank, White is “ignoring the SEC’s core mission of investor protection.”

            In an angry op-ed, Sequoia Fund’s Roger Lowenstein criticized the Senator for overstepping her own authority.2  “Last time I checked, the S.E.C. was a regulatory agency of the executive branch, in which Ms. Warren is not, in fact, employed.”  The Intercept’s David Dayen responded sharply that the Constitution assigns the Senate oversight of the Executive Branch:3

              Last I checked, the SEC is an independent regulatory agency accountable to Congress, established by the Securities Exchange Act of 1934. Congressional oversight of the SEC happens at the committee level, for example by the Senate Banking Committee, of which Warren is a member.

            Note: Congress has explicitly prohibited the SEC from issuing rules requiring disclosure of political contributions, despite record-breaking public support for these rules during the comment period. Many experts have urged the SEC to continue to research and draft the rule, despite this restriction.

More on Citizens United and corporate “personhood.”

            In Corporate Citizen?: An Argument for the Separation of Corporation and State, Stetson law professor Ciara Torres-Spelliscy documents corporate efforts to dramatically enlarge political and commercial speech and religious “rights” through lawsuits, campaign contributions, and lobbying.   In an interview, she said:4

              One of the most troubling conclusions I came to when writing Corporate Citizen? was that the American Congress seems utterly incapable of dealing with climate change. This is a potentially deadly mistake that even the U.S. military recognizes as an existential threat. When I asked environmentalists why Congressional inaction on climate was the case, I got very similar answers from scientist Gretchen Goldman, environmental lawyer Deborah Goldberg and the former head of Greenpeace, Phil Radford. They all described how industries – especially the oil and gas industries – were particularly effective at lobbying to get Congress and regulators to do as little as possible to protect the environment. A common theme each mentioned was the attempt by businesses to manufacture doubt about the underlying climate science by paying scientists to spout the industry position that climate change is not caused by man, even though the scientific consensus is that climate change is caused by human activity. This is very similar to recent revelations that the sugar industry paid scientists to cast doubt on the link between sugar and heart disease. The impact is similar, the public is confused about what the truth is, and meanwhile elected officials are provided cover for failing to act. I find this lack of urgency on the issue of climate change personally troubling as I live in Florida, close to the coast. If nothing is done about climate change federally, my community and my home could be literally under water.

Concerns continue about corporate money in politics.

            The Wall Street Journal reports that an SEC initiative to allow funds to provide the required disclosures in digital form was thwarted by the paper industry.5

[W]hat was logical progress to some loomed as a menace to others – notably the American Forest & Paper Association and the Envelope Manufacturers Association. The two industries’ jointly funded group Consumers for Paper Options rallied retiree and consumer groups to join their campaign, decrying what they call the government’s “rush to digitize.” They persuaded a bipartisan coalition of politicians – especially from the paper-heavy state of Maine – to threaten legislation, blocking the rule.

            And Delaware, the state where most corporations are domiciled due to its management-friendly policies, has prevented changes to require more transparency on the people and money behind the companies registered there.6

1    http://corporatereformcoalition.org/
2    http://www.nytimes.com/2016/10/28/opinion/the-problem-with-elizabeth-warren.html?_r=0|
3    https://theintercept.com/2016/10/28/money-manager-thinks-high-decibel-elizabeth-warren-doesnt-know-her-place/
4    http://www.huffingtonpost.com/nell-minow/get-corporations-out-of-p_b_12072372.html
5    http://www.wsj.com/articles/print-is-dead-not-in-mutual-fund-reports-1472064595
6    http://www.reuters.com/article/us-usa-delaware-bullock-specialreport-idUSKCN10Z1OH

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