Candidate Donald Trump thought CEO pay was too high. Does the SEC?
As a candidate, Donald Trump was against high CEO pay. Now officials in his administration want to do away with a rule that advocates believe keeps CEO pay in check.
This week, Michael Piwowar the acting Chair of the U.S. Securities and Exchange Commission (SEC), said he has directed his staff to, “reconsider the implementation of” a rule that required public companies to disclose the pay ratio between high level executives and company employees.
During an interview in September 2015 Donald Trump told “Face the Nation,” moderator John Dickerson he didn’t like the growing disparity between CEO pay and the average worker.
“Well, it does bug me.” Trump said, but added, “It’s very hard if you have a free enterprise system to do anything about that. The boards of companies are supposed to do it. But I know companies very well. And the CEO puts in all his friends. And so you will take a company like, I could say Macy’s or many other companies, where they put in their friends as head of the company, and they get whatever they want, because the friends love sitting on the board.”
A report published in July 2016 by the liberal Economic Policy Institute (EPI) found in 2015 CEOs of America’s largest firms made 276 times the pay of their average worker. According to their report CEO pay rose 46.5% between 2009 and 2015 as opposed to worker pay rising 1.3%.
Trump attributed the problem to “the system” saying it has allowed major companies to “put in their friends as head of the company, and they get whatever they want.”
“So that’s a system that we have.” Trump told Dickerson. “And it’s a shame and it’s disgraceful. And, sometimes, the boards rule. But I would say it’s probably less than 10 percent. And you see these guys making these enormous amounts of money. It’s a total and complete joke.”
Now Piwowar is targeting the rule adopted in 2015 by the SEC and mandated by Dodd- Frank, a Wall- Street reform legislation signed in 2010 made in response to the 2008 Financial Crisis. The rule went into effect this year, but Piwowar is directing his staff to reconsider implementing the rule because companies have encountered “unanticipated” problems with compliance (the SEC’s language remains vague on the matter). The Center on Executive Compensation, an advocacy group for large employers, says the SEC rule requires companies to engage in costly “unnecessary” data collection only to provide “potentially misleading” information.
The future of the recommendation remains unclear as President Trump’s pick to head the SEC, Jay Clayton, has yet to be confirmed by the Senate, but it may not matter. Last week the president signed an executive order beginning the process of removing financial regulations and has promised to cut out the majority of Dodd-Frank. Josh Bivens, Director of Research at EPI, admits that because the new rule has not been implemented it is hard to know what type of impact the rule would have, but it seems clear that despite Donald Trump’s tough campaign rhetoric, and his willingness to interfere in the free market system in other instances, this is not looking like one of them.