[House Report 114-504]
[From the U.S. Government Publishing Office]


114th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                      {      114-504

======================================================================



 
                 BURDENSOME DATA COLLECTION RELIEF ACT

                                _______
                                

 April 19, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 414]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 414) to amend the Dodd-Frank Wall Street Reform 
and Consumer Protection Act to repeal certain additional 
disclosure requirements, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose and Summary

    Introduced by Representative Huizenga on January 20, 2015, 
H.R. 414, the Burdensome Data Collection Relief Act, repeals 
Section 953(b) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Public Law 111-203), which requires 
all publicly traded companies to calculate and disclose in 
their annual proxy statements with the Securities and Exchange 
Commission (SEC) the median annual total compensation of all 
employees of the company excluding the Chief Executive Officer 
(CEO), disclose the annual total compensation of the CEO, and 
calculate and disclose a ratio comparing those two numbers. 
H.R. 414 alleviates the enormous burden and complexity Section 
953(b) poses to publicly traded companies, with very little, if 
any, corresponding benefit to investors.

                  Background and Need for Legislation

    The disclosure requirements imposed by Section 953(b) of 
the Dodd-Frank Act originated in the Senate, and were neither 
discussed nor debated during the Conference Committee's 
deliberations on the legislation. The legislative history and 
the Dodd-Frank Act itself are both silent with respect to the 
purported purpose of the pay ratio rule. This silence is not 
surprising as Congress did not hold any hearings on Section 
953(b) prior to its inclusion in the Dodd-Frank Act.
    Following enactment of Dodd-Frank, both Republican and 
Democratic Members of Congress began to question the costs of 
complying with Section 953(b), the utility of the information 
required to be disclosed, and the feasibility of its 
implementation. Specifically, Section 953(b) requires all 
publicly traded companies to calculate and disclose in annual 
filings with the SEC the median annual total compensation of 
all employees excluding the CEO, disclose the annual total 
compensation of the CEO, and calculate and disclose a ratio 
comparing those two numbers.
    Proponents of Dodd-Frank's pay ratio disclosure requirement 
cited statistics suggesting that the ratio of CEO salaries to 
the pay of the average worker at large U.S. firms has increased 
from 20 to 1 in 1965 to 300 to 1 today. Critics of the 
provision pointed out that it does little, if anything, to 
promote the SEC's investor protection mission, and that 
addressing income inequality is not the SEC's statutory role.
    On August 5, 2015, by a partisan vote of 3-2, the SEC 
finalized the pay ratio rule, with Commissioners Dan Gallagher 
and Michael Piwowar dissenting. In dissenting from the SEC's 
initial proposal to implement Section 953(b), Commissioner 
Gallagher noted that the proposal ``continues a trend of 
politically motivated new disclosure requirements that impose 
unnecessary compliance costs on U.S. issuers, reducing their 
international competitiveness while providing no benefits to 
investors and political benefits to special interest groups.'' 
Commissioner Gallagher has also described the pay ratio rule as 
``social policy masquerading as disclosure requirements,'' 
which has the effect of encouraging companies to remain 
private. Commissioner Gallagher's dissent of the final rule 
appropriately observed that ``addressing perceived income 
inequality is not the province of the securities laws or the 
Commission.'' SEC Chair Mary Jo White has expressed similar 
concerns; in an October 3, 2013 speech about Dodd-Frank 
entitled ``The Importance of Independence,'' she noted that 
several of the Act's provisions appear ``more directed at 
exerting societal pressure on companies to change behavior, 
rather than to disclose financial information that primarily 
informs investment decisions.'' Commissioner Piwowar's dissent 
noted that the adoption of the final rule to implement Section 
953(b) is, ``nothing more than a sad example of surrendering 
the Commission's agenda to politically-connected special 
interests and acquiescing to the bullying tactics of their 
political allies.''
    The SEC expended considerable resources to implement 
Section 953. In response to an inquiry from Financial Services 
Committee Chairman Hensarling and Representatives Garrett and 
Huizenga, the SEC disclosed on December 11, 2014, that since 
2011, SEC staff have spent 7,196 hours--at a cost of $1.1 
million--writing the pay ratio rule, fueling concerns that the 
entire exercise has been a major distraction from the SEC's 
mission to protect investors, promote fair, orderly, and 
efficient markets, and facilitate capital formation.
    The SEC estimates the pay ratio compliance costs to be $1.3 
billion on an upfront basis, and $526 million on an ongoing 
annual basis. It is difficult to believe that the vague, 
potential benefits posited by the final rule outweigh the 
estimated compliance costs, especially considering the rule's 
economic analysis, which cites the SEC's ``inability to 
quantify the benefits.'' Furthermore, the SEC further observed 
in the final rule that the pay ratio disclosure may warrant 
additional disclosures from a public company as the company 
seeks to explain other compensation data points. Because the 
costs of complying with Section 953(b) are high relative to the 
minimal, if any, benefits that investors receive from the 
disclosures, H.R. 414 repeals Section 953(b) to ensure that 
resources that would have been allocated to complying with this 
provision can be devoted to more productive economic 
activities.

                                Hearings

    Matters relating to Section 953(b) were discussed at a 
March 24, 2015 hearing of the Committee on Financial Services 
entitled ``Examining the SEC's Agenda, Operations, and FY 2016 
Budget Request,'' at which SEC Chair Mary Jo White testified, 
and at a July 28, 2015 Committee hearing entitled ``Dodd-Frank 
Act Five Years Later: Are We Prosperous?''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 30, 2015 and ordered H.R. 414 favorably reported to 
the House without amendment by a record vote of 32 yeas and 25 
nays (record vote No. FC-59).

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. On 
September 30, 2015, the Committee on Financial Services met in 
open session and ordered H.R. 414 favorably reported to the 
House without amendment by a record vote of 32 yeas and 25 nays 
(record vote No. FC-59)


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 414 
will provide for the allocation of capital to more productive 
uses by repealing the disclosure requirement imposed by Section 
953(b) of the Dodd-Frank Act, which yields little if any 
benefit to investors while posing significant compliance costs 
on publicly traded companies.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 20, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 414, the 
Burdensome Data Collection Relief Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 414--Burdensome Data Collection Relief Act

    H.R. 414 would repeal a provision of current law that 
requires a public company to disclose the ratio of the median 
of the annual compensation of its employees (not including the 
chief executive officer) to the annual compensation of its 
chief executive officer (or equivalent position). The bill also 
would nullify the rule released by the Securities and Exchange 
Commission (SEC) to implement that requirement.
    Based on information from the SEC, CBO expects that 
nullifying the rule would not require any significant action by 
the agency; thus, CBO estimates that implementing H.R. 414 
would not have a significant effect on the agency's costs. 
Under current law, the SEC is authorized to collect fees to 
offset its annual appropriation; therefore, assuming 
appropriation action consistent with that authority, CBO 
estimates that implementing the bill would have a negligible 
effect on net discretionary spending. Enacting H.R. 414 would 
not affect direct spending or revenues; therefore, pay-as-you-
go procedures do not apply.
    CBO estimates that enacting H.R. 414 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2026.
    H.R. 414 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 414 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 414 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 414 does not require any 
directed rulemakings.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 414 as the ``Burdensome Data 
Collection Relief Act.''

Section 2. Repeal of Additional Disclosure Requirements

    Section 953(b) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (15 U.S.C. 781 note) is repealed and 
any regulations issued pursuant to such subsection shall have 
no force or effect.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets and 
existing law in which no change is proposed is shown in roman):

       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT




           *       *       *       *       *       *       *
 TITLE IX--INVESTOR PROTECTIONS AND IMPROVEMENTS TO THE REGULATION OF 
SECURITIES

           *       *       *       *       *       *       *


Subtitle E--Accountability and Executive Compensation

           *       *       *       *       *       *       *


SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES.

  (a) Disclosure of Pay Versus Performance.--Section 14 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by 
this title, is amended by adding at the end the following:
  ``(i) Disclosure of Pay Versus Performance.--The Commission 
shall, by rule, require each issuer to disclose in any proxy or 
consent solicitation material for an annual meeting of the 
shareholders of the issuer a clear description of any 
compensation required to be disclosed by the issuer under 
section 229.402 of title 17, Code of Federal Regulations (or 
any successor thereto), including information that shows the 
relationship between executive compensation actually paid and 
the financial performance of the issuer, taking into account 
any change in the value of the shares of stock and dividends of 
the issuer and any distributions. The disclosure under this 
subsection may include a graphic representation of the 
information required to be disclosed.''.
  [(b) Additional Disclosure Requirements.--
          [(1) In general.--The Commission shall amend section 
        229.402 of title 17, Code of Federal Regulations, to 
        require each issuer, other than an emerging growth 
        company, as that term is defined in section 3(a) of the 
        Securities Exchange Act of 1934, to disclose in any 
        filing of the issuer described in section 229.10(a) of 
        title 17, Code of Federal Regulations (or any successor 
        thereto)--
                  [(A) the median of the annual total 
                compensation of all employees of the issuer, 
                except the chief executive officer (or any 
                equivalent position) of the issuer;
                  [(B) the annual total compensation of the 
                chief executive officer (or any equivalent 
                position) of the issuer; and
                  [(C) the ratio of the amount described in 
                subparagraph (A) to the amount described in 
                subparagraph (B).
          [(2) Total compensation.--For purposes of this 
        subsection, the total compensation of an employee of an 
        issuer shall be determined in accordance with section 
        229.402(c)(2)(x) of title 17, Code of Federal 
        Regulations, as in effect on the day before the date of 
        enactment of this Act.]

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