Along with making the case to keep executive compensation the way it is, the Financial Executives International recently said that investors are not well served by the complexity of financial reporting and released a four-point plan to address the problem.
The four recommendations can provide a way for regulators to mitigate the current problems within financial reporting, as well as the burdens of accounting rules faced by public companies, FEI said. The group suggested that:
- The Financial Accounting Standards Board and the Securities and Exchange Commission, in coordination with key financial reporting stakeholders (preparers, auditors and financial statement users), should take steps to end the proliferation of detailed rules;
- Congress should consider meaningful class-action reform;
- The SEC and the Public Company Accounting Standards Board should develop a framework that provides effective regulation in a principles-based environment, one that balances the objective of investor protection with the need to maintain market competitiveness; and,
- Stakeholders should come together to form an independent “Committee on Complexity.”
The details of the plan are outlined at www.fei.org.Seperately, FEI has also submitted formal comments to the House Ways & Means Committee, which recently held a hearing to discuss several “revenue raisers” passed by the Senate as part of its minimum wage/small business tax relief bill. The Senate bill would raise the minimum wage by $2.10 over two years, and would provide several tax breaks for small businesses.
But FEI says that to pay for these tax breaks, the bill would impose a series of tax hikes that would impact large companies -- including, “arbitrary caps” on non-qualified deferred compensation, the denial of deductibility for punitive damage payments and negotiated settlement payments, and new limits on the deductibility of executive compensation. Not surprisingly, the FEI is opposing those measures.
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