WASHINGTON–While it will have no bearing on credit unions, should the Trump Administration and Congress repeal the Dodd-Frank Act, one ramification will be the scrapping of rules designed to make pay in corporate America more egalitarian.
Bloomberg noted that the law, crafted in the aftermath of the 2008 financial crisis, contains provisions that strengthen investors’ ability to restrain outsized pay packages for company chiefs. The bill requires clawback provisions, advisory votes on executive compensation and mandated disclosure of a CEO-to-worker pay ratio.
This creates an ironic scenario, as Bloomberg noted that Trump soared to victory on promises of returning economic power to “forgotten Americans,” criticizing chief executive officer pay along the way. “You see these guys making these enormous amounts of money,” Trump told CBS in a 2015 interview. “It’s a total and complete joke.”
Bloomberg added that overturning Dodd-Frank could reduce leverage over corporate boards enjoyed by institutional investors, who serve as stewards for American savers.
“The law’s say-on-pay rule, requiring public companies to let shareholders weigh in on executive compensation at least every three years, was introduced in 2011 to eliminate pay that was either too large or could encourage excessive risk-taking,” Bloomberg said. “While pay packages for U.S. executives haven’t declined since then, the rule prompted many boards to ramp up engagement with large investors.”
In addition, Bloomberg further reported that if the law is rescinded, some Dodd-Frank rules might be short-lived. That includes the CEO-to-worker pay ratio set to take effect in 2017, and guidelines for disclosure of the relationship between company performance and executive compensation that haven’t yet been implemented. Trump has vowed to issue a temporary moratorium on new regulations that aren’t “compelled by Congress or public safety.”