Revamps Plan on Pay Disclosure
From Bloomberg News
The Wall Street Journal
Friday, August 12, 2006
The Securities and Exchange Commission proposed a revamped
rule Friday that would require companies to provide
compensation details for top-paid nonexecutives who make
"significant policy decisions."
The proposal would for the first time require companies to
disclose the pay of as many as three nonexecutive employees
in addition to the compensation of five top managers. The
plan, released on the SEC's website, backtracks from a
proposal by the regulator in January for companies to
disclose the pay of employees such as television
personalities, professional athletes and Wall Street
traders, who don't have management duties.
The SEC has opened a 45-day public comment period for the
revised proposal, asking whether it balances investors'
needs for compensation information with the privacy concerns
of nonexecutives. The agency also is seeking comment on
whether it should require companies to describe the duties
of the three top-paid nonexecutives and define the phrase
"responsibility for significant policy decisions."
"They're trying to prevent companies from tucking their most
significant policymakers out of the spotlight by not making
them a corporate officer," said Mark Borges, a former SEC
attorney and principal in the Washington office of Mercer
Human Resource Consulting.
Last month, the SEC adopted the first overhaul of executive
pay rules in 14 years. In doing so, the agency shelved the
measure on top nonexecutives after companies including
Morgan Stanley, T. Rowe Price Group Inc. and DreamWorks
Animation SKG Inc. complained that disclosing the salaries
could stir jealousy among employees and help recruiters
steal prized talent.
The revised SEC proposal satisfies concerns that disclosure
of nonexecutives' compensation will make it more difficult
for companies to compete, said Patrick McGurn, vice
president and director of corporate programs at
Institutional Shareholder Services, a Bethesda, Md.-based
firm that advises large investors. "They've cured the
problem," he said.
The proposal would apply to companies with a market value of
$700 million or higher and cover disclosure of pay for
nonexecutives over the previous year, the SEC said. It
would allow companies to identify the three employees by job
description, not name.
The SEC intends to give investors information about "people
who wield a significant amount of influence in an
organization, and that significance is represented by the
amount they make," Borges said.
Such employees may include the director of a news division
of a major television network, a portfolio manager in charge
of equity funds at a money management firm or the head of a
technological innovation unit, the SEC said in the proposal.
"A salesperson, entertainment personality, actor, singer or
professional athlete who is highly compensated but who does
not have responsibility for significant policy decisions
would not be the type of employee about whom we would seek
disclosure," the SEC said.