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Corporate Insider Exposes Opponents of CEO Pay Disclosure as “Petty Guardians of Self-Interest”

Earlier this week, the Securities and Exchange Commission finally — after a five year delay — allowed the implementation of a 2010 federal law requiring America’s largest publicly-chartered corporations to disclose the ratio of the pay of their CEOs to the pay of their average workers.  Due to further SEC intransigence, the won’t actually see any of these reports until 2018 — eight years after the requirement was passed into law.  Why has the SEC delayed, delayed, and delayed action at every possible step, when the ratio of public comments to the SEC regarding implementation is an astonishingly high 3,000 comments for the measure for every 1 comment against it?  The answer is that to the SEC, some comments matter more than others.  Some people matter more than others.

It’s possible for us to peek behind the curtain at the inside game behind the delay of this rule, thanks to the fascinating public comment of Lee S. Webster. Lee S. Webster is not an ordinary person like you or I. He was a leader at the Society for Human Resource Management, a professional organization that supports hiring, firing and employee management in corporate America, and before that, Webster worked as a leader in the ExxonMobil and Pepsi corporations. He’s no socialist. He’s not writing as an anti-corporate figure. Webster has a history as a corporate insider, which makes his letter all the more telling.

Webster writes to indicate his support for implementation of the CEO pay disclosure law. But more than that, he describes the action of corporate forces to “quash” an earlier attempt at implementing CEO pay disclosure. When news got around about an attempt by a committee of business leaders to draft standards for CEO pay disclosure, the committee’s work was quickly brought to an end. According to Webster’s letter, “entrenched,” “collusive,” “anti-competitive” corporate leaders held an off-the-record meeting at the U.S. Chamber of Commerce to stop CEO pay disclosure from the inside. Webster asserts that the same colluding corporate leaders, eager to protect their padded wallets, have been behind the delay of CEO pay disclosure.

Webster’s allegations have not received any attention from the professional broadcast news media. To help his account see the light of day, I’ve placed the full text of Webster’s letter below.

December 1, 2014
Elizabeth M. Murphy, Secretary US Securities and Exchange Commission
100 F Street, NE Washington, D.C. 20549-1090
Via Email:

Re: File Number S7-07-13 – Dodd-Frank Act Pay Ratio Disclosure Mandate; Proposal for a Safe Harbor Disclosure Process

I write as a twenty year practitioner and an expert in human resources. I have also spent my career in various leadership roles in large public organizations. I offer my support for the proposed rule regarding the CEO Pay Ratio. Moreover, I have signed the document that NSFM submitted and support as well its table 1 that indicates the recommended disclosures. Any effort to fully implement the parts of the Dodd-Frank Act on Executive Compensation, Risk Management, and Corporate Governance would be a great benefit to investors, employees and even consumers of the products and services of the effected companies. I come at this issue as someone who also attempted to encourage companies to become more transparent in their organizational structures and their management of workforce issues. I believe that the same entrenched organizational leaders that oppose the full expression of the Dodd-Frank Act, were largely the same leaders who quashed my efforts as well.

As the former Director of HR Standards Development for the Society for Human Resource Management and the Chair of the ISO Technical Committee 260, I oversaw the development of American National and ISO standards in human resources from 2008 to 2013. One area of inquiry we pursued was the development of an American National Standard that we called, “Investor Metrics.” This standard would help public companies capture and report to their owners those material workforce management metrics that investors should know before making investment decisions. The opportunity then, as now with the Dodd-Frank Act, was to establish consistent, comparable, and credible measures that were publicly reportable to the investment community. Over 160 participants from HR, finance, accounting, and academic communities worked for 18 months to develop this document.

However, the same forces that I expect to oppose the full implementation of the Dodd-Frank Act, met at the US Chamber of Commerce in October 2012 to pressure me and those developing this standard to stop this work. The attendees, many of whom were the CHROs or government relations executives from F500 companies and nonprofit associations, argued that investors were not interested in workforce performance/management data. Although many had clearly not read the draft standard, they argued that the metrics were impossible to gather, that they are not “material” disclosures, and to disclose this information would create risk for their companies. The metrics in question were similar to the Safe Harbor factors that are under discussion in File Number S7-07-13. Also note that these attendees did not want to improve the draft standard. They instead wanted the work to stop and no further mention be made about it, especially to the SEC.

In my opinion, their true desire was to stifle free inquiry into ways to create value for investors and to avoid the direct accountability to CHROs that would and should emerge from providing the investment community honest and timely information about their human resource practices, including pay. As the NSFM document shows, having an accurate and comparable description of the management structure and the organizational architecture of public companies is essential in order to fully understand and respond to the complexity of the Dodd-Frank pay ratio. I believe reason they demanded that this meeting be “off-the-record” and that they refused to let anyone who supported these HR disclosures participate was to shield these collusive and anti-competitive views from the public. It would be a historic shame for the SEC to permit the same petty guardians of self-interest to succeed in denying investors the Safe Harbor information they need to make the wisest decisions possible about the quality of the governance practices of publicly traded companies.

Thank you for your time and consideration of my views.

Sincerely, Lee S. Webster, JD/MBA

Former Director, HR Standards, SHRM

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