Executive Compensation Disclosures

Know More: Executive compensation

One may view severance packages and high executive pay to be outrageous. While those in the rank and file may be cashing their unemployment checks, or living from paycheck to paycheck, executive pay and severance packages for departures appear deserved to some.

On January 17, 2006, the SEC voted unanimously to propose for comment an overhaul of the executive compensation disclosure rules. The last previous major change in these rules was in 1992. One of the reasons for these proposed changes is to help investors keep an eye on how much of their money is being paid to top executives who work for them.
Some highlights of the proposed changes:

1. Compensation Discussion and Analysis will replace the Compensation Committee Report and the Performance Graph and will be filed (not just furnished).

2. Summary Compensation Table (SCT) will use a dollar grant date value (based on FAS 123R) for equity awards, including options, and will provide a column for the total of all compensation. All compensation must be in the SCT.

3. Perquisites will require disclosure if $10,000 or more.

4. There will be two tables for grants of performance-based equity awards and for grants of all other equity awards. Presumably these tables will replace the current options grants table.

5. Post-employment compensation (retirement, severance, deferred compensation) will require detailed disclosure of potential benefits to the Named Executive Officers (NEOs) and will have to be quantified in two new tables. NEOs will include: CEO, CFO, 3 additional most highly paid executive officers, 3 additional non-executive officers who are highly paid.

6. Director compensation will have to be disclosed for each director and will be included in a table.

7. Form 8-K will only be triggered with respect to compensation disclosures for NEOs.

8. Related party transactions (Reg. S-K Item 404) threshold will increase from $60,000 to $120,000, and there will be additional disclosures on policies and procedures for approving such transactions.
9. Corporate governance disclosures will be consolidated in new Item 407 of Regulation S-K.

Read the press release containing a link to the opening statement of Chairman Christopher Cox.

Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

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