CEO Pay-Ratio Disclosure Rule’s Lifespan Looks Short

A rule requiring companies to disclose how CEOs’ compensation compares with that of the rank and file has been put up for review, a welcome development for critics concerned it imposed too heavy a regulatory burden.

Introduced by the Obama administration, the rule was scheduled to take effect on or after the fiscal year commencing January 1. The review, announced by the Securities and Exchange Commission’s acting chairman, may come too late to prevent companies from at least initially having to comply, though it could mark the start of a roll back in the future.

“It is my understanding that some companies have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline,” the SEC’s acting chair, Michael Piwowar, said in a statement.

Piwowar said SEC commission staff would reconsider the implementation of the rule “based on comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”

A rollback of the rules in the U.S. would come just as Britain’s conservative government considers introducing a similar rule amid heightened anxiety over income inequality and its possible contribution to the rise of populist political movements.

Critics of the rule in both countries have argued that it doesn’t always paint an accurate picture. Bankers, for example, are paid much more than shop assistants, meaning the pay ratio of a retail CEO would look much bigger than a banking CEO, even if they were paid much less.

And the cost of compliance also has been singled out as a problem. Almost half the CEOs from 150 U.S. public companies recently questioned by recruitment firm Korn Ferry were at least “somewhat concerned” with understanding the steps needed to make the disclosure, while 47% weren’t sure precisely what they needed to disclose, putting them at risk of penalties from regulators.

Piwowar’s announcement comes just days after Donald Trump ordered a review of the Dodd-Frank Act, which imposed a raft of new regulations on the financial services sector in the wake of the great recession.

Piwowar was selected by Trump as acting SEC chairman while his permanent pick for the role, Jay Clayton, awaits a confirmation hearing.