president-elect donald trump campaigned partly on a vow to dismantle the 2010 dodd-frank law, which supercharged bank oversight with myriad regulations. corporate finance chiefs outside the sector, however, are focusing on the fate of the law<u+2019>s nonbank provisions, which range from directives on executive pay to rules on hedging disclosure. implementing some of those dodd-frank rules is costly, time-consuming and fails to help investors, say financial executives and experts. other rules are seen as reasonable by some executives<u+2014>even exuding common sense<u+2014>and may be continued by companies, regardless of the law<u+2019>s future. <u+201c>there are a lot of things you would do because they<u+2019>re the right things to do,<u+201d> said teri list-stoll, who was recently named cfo of gap inc., at the financial executives international conference earlier this month. ms. list-stoll, who served cfo stints at dick<u+2019>s sporting goods inc. and kraft foods, said companies that had invested in complying with the regulations, and whose shareholders are happy with the results, will likely keep some of those measures even if dodd-frank were repealed in its entirety. one of the more popular rules to take effect is the so-called say-on-pay regulation the u.s. securities and exchange commission adopted in 2011. it requires companies to hold a shareholder vote on executive compensation at least every three years. it likely would be maintained by many businesses. <u+201c>say-on-pay votes may be continued by companies because investors like it,<u+201d> said meredith cross, a partner at wilmer cutler pickering hale & dorr llp and a former director of the sec<u+2019>s corporation finance division. she helped write portions of dodd-frank. <u+201c>the vote itself doesn<u+2019>t cost anything,<u+201d> ms. cross said, though she added: <u+201c>the impact of having to change your compensation structure may be costly.<u+201d> some dodd-frank rules are common sense and easy to implement, experts say. last year, for example, the sec approved the issuance of a proposed rule that would require companies to disclose in their proxies whether employees or directors are allowed to hedge the company<u+2019>s stock. <u+201c>i assume you had to figure it out to begin with,<u+201d> said adam pritchard, a professor of securities law at the university of michigan. <u+201c>it<u+2019>s just a matter of cutting and pasting.<u+201d> on the other hand, beginning in 2018, a pay-ratio disclosure rule will require a company to compare its chief executive<u+2019>s pay to the median annual compensation of all its other employees. the utility of the pay-ratio rule, however, is seen as questionable. <u+201c>the ceo-to-median pay ratio may generate unneeded confusion among shareholders across many industries,<u+201d> richard peretz, cfo of united parcel service inc., said in an email. <u+201c>there are several acceptable means for calculating the median employee pay, thereby rendering the resulting ratio even less valuable as a comparator across companies.<u+201d> <u+2018> there are a lot of things you would do because they<u+2019>re the right things to do. <u+2019> others agree. <u+201c>how you measure it leads to very different conclusions,<u+201d> said alon kalay, an assistant professor of accounting at columbia business school. <u+201c>do you include foreign workers and part-time workers?<u+201d> mr. kalay cautioned against comparing the pay-ratio figure at two companies even in the same industry, citing microsoft corp. and apple inc., the latter of which operates a network of stores. <u+201c>apple has a lot more retail workers than engineers,<u+201d> he said. meanwhile, united parcel<u+2019>s mr. peretz said a rollback of regulations might simplify business for the logistics company. <u+201c>if dodd-frank is repealed, or replaced, ups may be able to reduce some additional data collection, analysis and auditing,<u+201d> he said. still, dodd-frank appears unlikely to be overturned in its entirety. for now, senate rules, in effect, would require 60 votes to bring any legislation overhauling dodd-frank to a vote, and republicans currently stand to control 52 seats in the coming senate. so there could be some horse-trading with democrats over any changes to the law. some elements of dodd-frank have proven to be unwieldy. some manufacturers, for example, would like to scratch the law<u+2019>s section 1502 provision on conflict minerals because of the cost and the difficulty in complying. it requires companies to investigate their supply chains to determine whether their products contain gold, tantalum, tin or tungsten that financed or helped armed groups in the democratic republic of the congo or in the surrounding central africa region. lrad corp. has spent nearly four years determining the countries of origin for the content in its metal acoustic products, according to its cfo, kathy mcdermott, who added that the company may need to switch suppliers. it could also report that some of its products haven't been found to be conflict-free. a report by the government accountability office last year found that 67% of companies were unable to determine the country of origin of the minerals in their supply chain. <u+201c>we will also need to incur audit fees for an independent private-sector audit to review our assessment,<u+201d> she said in an email. experts expect congress to target the conflict minerals rule. <u+201c>the reason it<u+2019>s on the chopping block is that it didn<u+2019>t have anything to do with profiting investors,<u+201d> mr. pritchard said. <u+2014>maxwell murphy contributed to this article write to richard teitelbaum at richard.teitelbaum@wsj.com corrections & amplifications: an earlier version of this article incorrectly stated the sec approved the rule on disclosure in proxies. the agency approved the issuance of proposed rules. (nov. 29)
dodd-frank rules on business: up for a rethink - wsj
richard teitelbaum kimberly s. johnson