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March 7, 2022

Better Markets Supports SEC Proposal on the Relationship Between Executive Pay and Company Performance But Urges Enhancements

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ Comment Letter to the Securities and Exchange Commission in response to the agency’s proposal that would require companies to disclose how executive compensation relates to the company’s financial performance:

“This rule was mandated under the Dodd-Frank Act, and its core purpose is to expose a phenomenon that has become all too common on Wall Street and at many public companies:  the enormous executive compensation packages that are way out of line with subpar, misguided, or even reckless corporate leadership. It is one element of an important collection of Dodd-Frank reforms aimed at increasing transparency, equipping shareholders to play a larger role in setting compensation and limiting bloated executive compensation packages that undermine a firm’s long-term success and encourage high-risk activities.

“The SEC originally proposed the pay v. performance rule in 2015 so it’s been delayed far too long, but we’re pleased that the agency has reopened comment with an eye to finalizing this important reform as soon as possible.

“The SEC has developed a robust rule and is considering enhancements that we support. For example, the final rule should expand the metrics of financial performance to include not just “total shareholder return,” which can be misleading, but also measurements based on net income.  The SEC is also considering requiring disclosure of the five most important performance measures actually used to set executive compensation. That provision would shed much-needed light—which investors are increasingly demanding—on how companies and executives are prioritizing environmental, racial justice, and sound corporate governance considerations.

“Finally, we urge the Commission to resist the inevitable calls from industry opponents to weaken or dilute this generally well-crafted rule, and we caution against the preparation of an unreliable, unfair, and unnecessary quantitative cost-benefit analysis.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

Contact: Evelyn Swan (202-618-6433) or eswan@bettemarkets.org

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