Today, Congressman Dan Kildee (D-MI), Vice Ranking Member of the House Committee on Financial Services, spoke on the House floor in opposition to H.R. 1343:
As Prepared for Delivery
H.R. 1343 eliminates important disclosures that private companies must provide to their employees in the event that they’re compensating those employees with stock. This bill would limit transparency. If companies want to pay their employees in stocks, they should have to disclose to their workers the risks associated with those investments.
Currently, private companies can provide up to $5 million worth of stock compensation annually to their employees and are not required to provide any financial disclosure. This bill would lift that cap to $10 million.
If companies want to provide an employee with stock compensation, they should be required to inform that employee of the appropriate financial information, benefits and risks associated with the investment, including two years of company financial statements. All of this information is commonly available to typical investors. This stock is compensation for their work – employees deserve to understand the value of their compensation prior to accepting it. They deserve the same protections that other investors in the company would get.
In his testimony before the Capital Markets Subcommittee, Professor Mercer E. Bullard noted that to take advantage of the bill, an issuer would have to have at least $34 million in total assets—surely such minimal disclosures are not too burdensome for companies of this size.
I understand that some proponents of this bill claim that such an exemption is needed because disclosure of this information by companies to employees runs the risk that confidential information will be leaked to competitors. However, employees with access to such information could be subject to non-disclosure agreements, as they typically are today.
Indeed, non-disclosure agreements are a simple solution that protects the company but does not deny employees the right to understand the worth of, or the risks associated with, the compensation they are receiving. Unfortunately, this bill limits transparency and protections for workers.
I oppose this bill, and I reserve the balance of my time.