The SEC today proposed a fundamental overhaul of its rules governing executive compensation disclosure to investors.
The proposal, unanimously approved by the five commissioners, would require companies to disclose policies and objectives for the executive compensation of their CEOs, CFOs and three other highest-paid executives and directors. Companies would have to disclose those officials' total compensation for the last three years, the present value of their stock options, restricted stock and other equity-based compensation at the time of the grants, and the present value of their pension and defined contribution plans.
Companies would also be required to disclose all perquisites given to the top executives in excess of $10,000. A similar section would disclose compensation for directors for the previous year.
The disclosures would be required in a company's proxy statement, annual reports, registration statements and Form 8-K filings. The disclosure rules were last reviewed in 1992.
"Simply put, our rules are out of date," Christopher Cox, chairman of the SEC, said at the open meeting where the proposal was approved. "In some cases, our disclosures obfuscate" rather than enlighten, Mr. Cox said.
The agency will now seek public comment on the proposal for 60 days.
