New SEC Rules for disclosure of Executive compensation 1663
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New SEC Rules for disclosure of Executive compensation
WASHINGTON (MarketWatch) – Securities regulators approved the biggest overhaul of executive-compensation disclosure rules in 14 years Wednesday, including a requirement that public companies lay out information about the timing of stock-option grants to their top officers.
Under the new Securities and Exchange Commission rules, companies are required to publish a table showing executives’ total compensation.
And, as questions continue to swirl about companies’ timing of stock-option grants, firms will also be required to show the values of those options when they were granted.
The options measure comes as federal investigators continue to probe companies in connection with timing of options grants. On Thursday, the Justice Department announced the first criminal case in connection with so-called backdating of stock options, charging two former Brocade Communications Systems Inc. executives with fraud. See full story.
SEC Chairman Christopher Cox said options are a legitimate form of compensation but stressed that investors need a clear picture of executives’ pay. Commissioner Paul Atkins echoed Cox, saying ‘we are not telling companies to use or not to use options’ as compensation.
Atkins, a Republican, also said companies ‘may not have had clear enough guidelines in the past’ about options-grant disclosure. Companies are asked to explain if options grants are timed to coincide with release of non-public information.
Commissioners also voted to re-propose a rule about disclosure of the pay of highly compensated non-executives. The newly proposed rule would exclude employees who have no responsibility for major policy decisions within the company.
The original proposal, dubbed the ‘Katie Couric clause’ after the highly paid network TV anchor, drew controversy because it would’ve revealed confidential bonuses and perks for the first time for big-name corporate employees.
Cox emphasized the agency isn’t trying to determine compensation. ‘It’s not the job of the SEC,’ he said, ‘to place limits on what executives get paid.’
The disclosure rules, meanwhile, make a host of changes in what information companies must report to their shareholders and the public. The rules also force companies to spell out perquisites unless they’re valued below USD10,000. Retirement benefits would be laid out in a new table.
Those and other rules apply to firms’ top executive, chief financial officer and the three other highest-paid officers, as well as directors. The chairman of the Business Roundtable’s corporate-governance task force said the rules would empower shareholders to make investing decisions and boards to set pay levels.
‘We believe the rule strikes a good balance between providing disclosure of accurate and complete compensation information, and the need for companies to prevent strategic information from being revealed to competitors,’ said Steve Odland, who serves as chairman and CEO of Office Depot Inc