US SEC chief calls for redo of executive compensation disclosure rules

By Douglas Gillison and Ross Kerber

NEW YORK/BOSTON, Dec 2 (Reuters) – The U.S. Securities and Exchange Commission should reform rules requiring disclosure of executive compensation and take action to reduce regulatory burdens facing smaller companies, Wall Street’s top regulator said on Tuesday.

In a speech at the New York Stock Exchange as a statement of his vision for the future of capital markets, ‌SEC Chairman Paul Atkins also previewed major themes in the agency’s deregulatory policy agenda.

Since taking over in April, Atkins has laid out plans to embrace the cryptocurrency industry and shift the balance of power for investors towards companies. The White House, which claims direct control over the agency, has also called for an end to quarterly reporting and reforms to address shareholder disputes.

“‌When the SEC’s disclosure regime is hijacked to require materiality-free information, investors cannot benefit,” Paul Atkins said in his prepared remarks. “‍We need a reset of these and other SEC disclosure requirements.”

Atkins also said having to comply with SEC regulations is a barrier to raising capital for smaller companies.

“The last comprehensive reform of these thresholds occurred in 2005. This neglect of regulatory care resulted in a company with a free float of as little as $250 million being subject to the same disclosure requirements as a company 100 times its size.”

Critics have warned that the SEC’s deregulation agenda and shrinking workforce are weakening the agency and potentially allowing risks and abuses to accumulate in the financial system.

Atkins and other Republicans, with the support of some corporate leaders, have targeted a range of pay disclosure rules, including those put in place after the 2008 financial crisis, that aim to give investors a clearer picture of executives’ incentives.

Among other things, Congress required companies to report the ratio of CEO pay to average employee pay. Average pay for top executives at S&P 500 companies was $18.9 million last year, according to a review by the AFL-CIO labor federation; This is up 7% from 2023, and the average CEO-to-employee pay ratio at these companies is 285-to-1.

Democrats have defended wage disclosures and limits they say are necessary to limit risky behavior. In his prepared speech, Atkins approvingly quoted Warren Buffett as saying that required disclosures backfired and helped increase CEO pay because “the new rules create envy, not moderation.”

(Reporting by Douglas Gillison in New York and Ross Kerber in Boston; Editing by Chizu Nomiyama and Paul Simao)