- The Washington Times - Tuesday, January 17, 2006


Federal securities regulators moved yesterday to require companies to provide far greater detail about their executives’ pay packages and perks in an effort to bring more transparency to an area that has provoked investor and public anger.

The five members of the Securities and Exchange Commission voted unanimously to propose the plan, which would make the biggest changes in rules governing disclosure of executives’ compensation since 1992.

The proposal will be opened to a 60-day public comment period and could be formally adopted by the SEC sometime afterward, possibly in time to take effect for the spring annual-meeting season next year.

Companies for the first time would be required to furnish tables in annual filings showing the total yearly compensation for their chairman, chief financial officer and the next three highest-paid executives. The true costs to the bottom line of their pay packages, including stock options, would have to be spelled out.

“This information is information that shareholders have a right to know,” Commissioner Cynthia Glassman said before the vote.

Also under the SEC proposal:

• The level at which total executive perks must be detailed would be reduced from $50,000 to $10,000.

• New disclosure tables for executives’ retirement benefits and the compensation of company directors would be required.

• Companies would be required to explain the objectives behind their executives’ compensation. Companies’ annual filings would have to include sections written in plain English on executive pay.

Recent studies have shown huge leaps in top executives’ salaries, bonuses and stock benefits in recent years, as well as big increases in executive compensation as a percentage of company earnings — money that otherwise would go to shareholders. At the same time, critics of corporate conduct underline what they see as a disconnect between company officials’ pay and performance.

With the pay gap between employees and bosses widening enormously, Commissioner Roel Campos said, investors may ask whether “payment for performance has been replaced by payment for pulse.”

SEC Chairman Christopher Cox, who has made fuller disclosure a high priority since taking the agency helm in August, said: “Simply put, our rules are out of date.”

Still, some critics of corporate conduct don’t believe fuller disclosure of compensation goes far enough because it won’t rein in runaway pay and may even create competitive pressure among companies that will push it up.

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