U.S. Securities and Exchange Commission Chair Gary Gensler said he is keen to finish a long-stalled requirement to clamp down on Wall Street bonuses when companies report incorrect financial information.
Gensler said he’s asked SEC staff to provide recommendations on a rule for clawing back executive pay and other parts of never-finished regulations that were mandatory under the Dodd-Frank Act. Specifically, Gensler said he wants to make sure that executives return any funds they are overpaid when a company publishes incorrect information in its financial statements.
“This is a simple concept that executives should not be paid based upon financial performance that is misreported,” Gensler said at an event Wednesday sponsored by the Council of Institutional Investors.
Pay practices that rewarded quick deals and short-term gains were blamed for contributing to the 2008 financial crisis. Under the Dodd-Frank regulatory overhaul signed into law almost two years later, regulators were required to limit those kinds of incentives to help protect the financial system. Yet more than a decade later, several rules that agencies including the SEC were required to finish -- including one on clawbacks -- are yet to be finalized.
“It’s a basic concept,” Gensler said. “If the numbers aren’t right -- if they’ve got to be revised -- then the executives should give back the compensation that was based on those misreported higher numbers.”
Gensler didn’t provide any timeline for finishing the long-delayed rule, which would impact executives at publicly-traded companies. He said he expected staff to propose regulations after conducting their review.
He added that the clawback rule was just one of the post-crisis regulations related to executive compensation that the agency hadn’t finished despite being required by the 2010 law. The SEC is one of six financial regulation agencies that would have to sign off on the pay rules, part of the reason why they’ve taken so long to complete.