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Thursday, July 27, 2006

SEC Issues Rules On Executive Pay Disclosures

Excerpts from today's Wall Street Journal:

"For the first time since the options-timing scandal mushroomed this year, federal regulators laid out requirements directing companies how to disclose their grants of stock options.
The new rules won't bar corporate boards from giving executives options at propitious times, but would instead shine a spotlight on such practices through increased disclosure. The guidelines are part of a sweeping overhaul to executive-pay disclosure the five-member Securities and Exchange Commission approved yesterday in a unanimous vote.
The rule takes effect in proxies filed by companies whose fiscal years end after Dec. 14. It will force companies to provide a total compensation figure for each of its top five executives. That number can be used to compare compensation across companies and industries."

I like the new disclosure rules. The more information, the better for shareholders. Unfortunately, the SEC dropped the “Katie Couric clause” that would have required compensation disclosures for highly-paid nonexecutive employees as well as the top five executive employees. The SEC took plenty of heat for the proposal, particularly from the entertainment industry, which claimed that the disclosure of such information would bring competitive harm to them in the negotiation for talent, etc. (See Jeffrey Katzenberg’s letter from SKG Dreamworks.)

Link to Chairman Cox’s introductory comments and a link to the SEC’s press release summarizing the new disclosures.


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