Institutions

$144bn New York City funds say executive pay ratio disclosure a “material benefit” to investors

War of words between investors/corporates over Dodd-Frank measure

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New York City Comptroller John Liu, in his capacity as Trustee of the five City Pension Funds – with combined assets of $144bn (€105.8bn) – has written to the Securities and Exchange Commission explaining that the planned rule that would require companies to disclose the ratio of CEO-to-worker pay will be a “material benefit” to investors.

It further demonstrates the difference of views between investors and corporate lobby groups on the measure, brought in under the Dodd-Frank Act.

As RI reported earlier in this month, the two groups are lining up against each other over the issue. Institutional investors including ERAFP, the €14bn 100% SRI pension fund for French civil servants, local authorities and the public hospitals sector, Bâtirente, the C$1.4bn (€1bn) pension fund for construction workers in Quebec, and ICCR, the $100bn coalition of more than 300 faith-based investors, have written to the SEC supporting the proposal.

But the National Investor Relations Institute (NIRI), which has 3,300 members representing over 1,600 listed firms,told the SEC the plans would provide no material benefit to most investors while imposing significant costs on companies.

Now Comptroller Liu has put his weight behind the SEC proposal, saying: “In short, and contrary to the National Investor Relations Institute’s … comment letter, we believe the draft rule would provide material benefit to investors.”

He said the plans would not, as NIRI argues, result in “misleading or inconsistent” disclosures by companies that would confuse investors and not contribute to their understanding of corporate pay.

“It is unfortunate that the trade association that represents investor relations professionals believes investors to be unsophisticated and easily confused,” Liu said.

The New York funds have supported the disclosure of pay ratio data since 2006 as it provides a “valuable metric” to understand compensation practices and inform proxy voting decisions. Liu’s letter to the SEC