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How Executive Pay and Dodd-Frank Influenced SEC Rulemaking
June 21, 2016
The Securities and Exchange Commission (SEC) states that its mission is “to protect investors, maintain
fair, orderly, and efficient markets, and facilitate capital formation." Former SEC commissioner Dan
Gallagher addressed the SEC's recent activities after Dodd-Frank and the trajectory of the commission
this morning at
Equilar's annual Executive Compensation Summit in Boston.
Daniel M. Gallagher, Jr.
Former Commissioner
Securities and Exchange
Commission
While Gallagher doesn't believe that government should be in the business of regulating corporate
governance, he acknowledged that as congressional pressure mounts, the SEC will likely move to adjust
and finalize the Dodd-Frank mandates. Throughout his comments as the Summit’s keynote speaker in
conversation with TK Kerstetter, CEO of Boardroom Resources and host of
“Inside America’s Boardrooms,” Gallagher emphasized
that alternative avenues might achieve the ends that Dodd-Frank set out to achieve. Yet the SEC is set
to address the issues of executive compensation and corporate governance disclosure in a hotly debated
political climate.
Mr. Gallagher covered everything from his day-to-day experience at the SEC to pay for performance and
shareholder concerns. See below for a short summary of his comments.
On the challenges faced by the SEC today:
"The SEC received over a quarter of the mandates from Dodd-Frank, and it's a mixed bag. Working at the
SEC is already a 24/7 job, and these rulemakings dominated the agenda during my time at the agency."
On Pay Versus Performance:
"There's core work to be done on pay vs. performance, and there was a lot of criticism of total shareholder
return as a metric, which came from all sides. There's probably a 60% to 70% chance that pay vs. performance
isn't finalized this year."
On the hot-button issues at the SEC:
"The number one hottest issue in the SEC is whether the commission should mandate that companies
disclose their political spending activities."
On Dodd-Frank:
"Here's the question to ask about the SEC agenda and Dodd-Frank: What's the opportunity cost? What
is the SEC not doing?"
On shareholder engagement:
"There's a proper balance between shareholder input and management's mandate to run a company.
The ability of shareholders to affect the trajectory of companies and decisions of management is
greater now than ever."
On the public markets and who is affected the most:
"Being a public company today is daunting. Companies have myriad options for exits, or simply to
grow as an organization. Private companies can invest in R&D and make their own decisions. But
now, average Americans are missing out on the opportunities in corporate America. Private
investments are for the wealthy, and they're doing well."
On shareholder activism:
"The shareholder activist issue is completely nuanced. Proxy advisors and shareholder proposals
play a part, but activists can serve a productive role. On the other hand, some activists pester
management with a short-term outlook. There's a proper balance between shareholder input and
management teams' mandate to run a company. The ability of shareholders to affect the trajectory
of companies and decisions of management is greater now than ever."
Stay tuned to the Equilar blog for more dispatches from the annual Executive Compensation Summit.
For more information about Equilar’s events and educational forums, please visit
www.equilar.com/equilar-events.
For more information on Equilar’s research and data analysis, please contact Dan Marcec, Director of Content &
Marketing Communications at dmarcec@equilar.com. Matthew Goforth,
research and content specialist, authored this post.