The SEC is broken, and we’re hitting it on several fronts. This week, CREDO members helped win an important victory.
The Securities and Exchange Commission (SEC) is broken and Democratic Chairwoman Mary Jo White is largely to blame. That’s why we’re hitting the SEC on several fronts, from demanding that Mary Jo White be replaced as Chair, to objecting to the waivers that let banks that admitted to criminal wrongdoing avoid penalties.
In our ongoing campaign to fix the SEC, CREDO members helped win an important victory this week: Forcing the agency to issue a rule on disclosure of CEO pay.
When we helped pass the Dodd-Frank Wall Street Reform and Consumer Protection Act back in 2010, we didn’t know that we’d have to fight for years to get the Democratic-led Securities and Exchange Commission to write a simple rule mandated by the law. Finally, five years later, under immense pressure from activists, the SEC voted 3-2 in favor of a new rule forcing publicly listed companies to disclose how much more their CEOs make than everyday employees.1
Make no mistake: This would not have happened without the sustained public pressure of CREDO members, Sen. Elizabeth Warren and the progressive movement.
The SEC is so dysfunctional and corrupt that even though Dodd-Frank required that the CEO pay disclosure rule be issued within a year of the law’s enactment, the SEC refused to act. More than 73,000 CREDO activists signed a petition demanding the rule, joining tens of thousands more who have demanded a tougher SEC that cracks down on Wall Street.2 Our voices, combined with those of countless allies who devoted time and energy to this fight, forced SEC Chair Mary Jo White to act and ultimately to vote in favor.
Our advocacy also resulted in a stronger than expected rule. Following the guidelines set out in Dodd-Frank, the rule requires companies to calculate the median pay – not the average, which could be skewed by a few well-paid individuals – of their employees, and compare it to the already-public compensation of the CEO. But it was tougher than anticipated in the specifics of how corporations go about calculating the median pay, for instance forcing them to count 95% of their overseas employees, who are often paid far less than U.S. workers.3
It is worth noting that this rule attracted so much attention not because it was a linchpin of Wall Street reform, but because it was one of the simplest and most commonsense elements of the Dodd-Frank reforms and was supposed to be issued with a year of the bill’s enactment – and yet the SEC still could not manage to implement it without a baffling and inexcusable delay. Last September, four years after Dodd-Frank passed, SEC Chairwoman Mary Jo White told the Senate Banking Committee that the SEC hoped to implement the rule by the end of 2014. In Spring 2015, Mary Jo White even lied to Sen. Elizabeth Warren about the timing of the rule, telling her it would arrive shortly before the SEC announced a further delay.4
In short: Passing one rule that should have gone into effect years ago does not take the heat off of the SEC, Chair Mary Jo White, or President Obama.
The SEC is still broken. To date, President Obama has done too little to help. If recent reports are accurate, only sustained advocacy from CREDO members and our allies stopped the president from nominating corporate defense attorney Keir Gumbs to fill an open seat on the Commission.5 There is little indication to date that he will pick someone like Kara Stein, a reforming willing to pick fights with Wall Street who has been dubbed “Sen. Warren’s ally on the inside.”6
Most importantly, President Obama’s hand-picked chair, Mary Jo White, has had two years to live up to here tough-on-crime rhetoric, but has failed to change the culture of the SEC or rein in Wall Street. It is long past time for her to go. She has:
- Backed “get out of jail free” cards for criminal banks, repeatedly voting to give big banks waivers allowing them to keep special perks despite breaking the law.7 White has even butted heads with reform-minded commissioner Kara Stein, who objects to these free giveaways to admitted criminals.8 As the fifth and tie-breaking vote on many issues, White regularly sides with Wall Street, not Main Street.
- Overseen a paralyzed, Wall Street-friendly SEC. Reports describe White’s SEC as plagued “by discord and paralysis” and her office as “the cheese cellar: It’s where policy goes to age.”9 Rules have taken years to finalize, and her frequent need to recuse herself due to her background as a private defense attorney – and her husband’s current job as a corporate lawyer – has empowered Republicans to demand lighter punishments for corporate lawbreakers.10 In fact, White’s biggest fans appear to be Republicans, with Sen. Mike Crapo praising her “flexibility” and rabidly pro-Wall Street commissioner Daniel Gallagher offering additional plaudits.11
- Hired a Goldman Sachs managing director and Romney donor as her new Chief of Staff. After overlooking Wall Street fraud as the director of investment at the SEC in the run-up to the financial crash, Andrew Donohue was later richly rewarded as managing director at Goldman Sachs, where he oversaw the firm’s legal matters. In 2012, he made a generous donation to Mitt Romney.12 And now, in a disgusting example of the revolving door, he’s about to return to the SEC in the highly influential position of chief of staff to Mary Jo White.13
On top of it all, the Securities and Exchange Commission has settled the majority of its cases without requiring companies to admit guilt, breaking a key promise Mary Jo White made in her confirmation hearing.14
The CEO pay disclosure rule is a sign that we are winning. It is evidence that putting direct pressure on the White House and on Mary Jo White personally produces results. Not only do we not intend to back off, we plan to expand our efforts. In the coming weeks, CREDO will continue to:
- Tell President Obama: Time for Mary Jo White to go. More than 113,000 CREDO members have asked the president to make it clear to White that her services are no longer wanted, and appoint a replacement who will get tough on Wall Street. Sign the petition | Share on Facebook or Twitter
- Tell President Obama: Break Wall Street’s grip on the Securities and Exchange Commission. The White House reportedly dropped plans to nominate a corporate attorney to the SEC after nearly 90,000 CREDO members demanded that President Obama appoint someone willing to get tough on Wall Street instead, but we need to keep pushing to fill the SEC with proven reformers. Sign the petition | Share on Facebook or Twitter
- Stand with Elizabeth Warren: Demand public hearings on bank waivers. Both the SEC and the Labor Department routinely grant banks waivers to keep their “trusted” status even when they admit to breaking the law, but we can stand with Sen. Warren to demand the Labor Department hold public hearings first. Sign the petition | Share on Facebook or Twitter
CREDO members have never been shy about taking on big fights when that fight is important. The Securities and Exchange Commission, with its wide-ranging responsibilities for overseeing private equity, hedge funds, mega-banks, and big corporations, is simply too crucial an institution to allow it to be hijacked by Wall Street.
Thank you for continuing to speak out,
Becky Bond, Political Director
- Victoria McGrane and Joann Lublin, “SEC Approval of Pay-Gap Rule Sparks Concerns,” Wall Street Journal, August 5, 2015.
- “Tell the SEC: Implement CEO pay-disclosure rule now,” CREDO Action.
- McGrane and Lublin, “SEC Approval of Pay-Gap Rule Sparks Concerns.”
- Elizabeth Warren, “Letter to the Honorable Mary Jo White,” Senate.Warren.Gov, June 2, 2015.
- Patrick Temple-West, “Elizabeth Warren allies delay Obama’s SEC pick,” Politico, July 7, 2015.
- Patrick Temple-West, “Elizabeth Warren’s ally on the inside,” Politico, May 18, 2015.
- Warren, “Letter to the Honorable Mary Jo White.”
- Temple-West, “Elizabeth Warren’s ally on the inside.”
- David Michaels and Robert Schmidt, “The Agency That Barely Moves,” Bloomberg, May 21, 2015.
- Ben Protess and Peter Eavis, “Political Fights Throw Sand in Gears of S.E.C.,” New York Times, May 28, 2015.
- Alec MacGillis, “Mary Jo White Doesn’t Scare Anybody,” The New Republic, May 4, 2015.
- “Andrew Donohue Donor Lookup,” OpenSecrets.org, Retrieved June 6, 2015.
- Kevin G. Hall, “Goldman lawyer becomes SEC chief of staff,” McClatchy, May 28, 2015.
- Warren, “Letter to the Honorable Mary Jo White.”