On May 13, the US House Committee on Financial Services passed the
Greater Accountability in Pay Act (HR 1188). The bill was proposed by Rep. Nydia Velazquez (D-NY) and passed out of committee by a nearly party line 29-23 vote. It will now go to the full House for potential consideration and a vote. A previous version of the bill also was approved by the committee in late 2019, but the full House did not bring it up for a vote.
The bill would amend Section 13 of the Securities Exchange Act to require reporting on:
- The percentage increase in the median of the annual total compensation of all executive officers (note: all executive officers, not solely named executive officers);
- The percentage increase in the median of the annual total compensation of all employees, excluding executive officers, over the last completed fiscal year;
- The ratio of the two percentages;
- A comparison of the executive officer increase percentage to the percentage change in the Consumer Price Index over the same period; and
- A comparison of the employee increase percentage to the percentage change in the Consumer Price Index over the same period.
The legislation leaves many questions unanswered, such as how total compensation is calculated, whether it includes equity grants or vested equity, and what employee population is eligible for inclusion. Further, even if passed, the SEC would need to issue implementing regulations which could interpret the details differently.
If brought up for a full House vote, the bill would likely pass. It could even pass from the corresponding Senate committee, but its prospects decline significantly after that, as Senate Republicans would filibuster the bill and it is unlikely to meet the 60-vote threshold to bypass a filibuster. However, given growing frustration with executive compensation actions during the pandemic, Senators may decide that allowing the bill to move forward could help them with lower- and middle-income voters. The Center will monitor the bill’s progress carefully and advocate against such a measure using similar arguments as noted against the pay ratio itself.
