The Securities and Exchange Commission will require public companies to provide more information about the pay given to top executives under rules unanimously adopted by the Securities and Exchange Commission.
The rules will also require corporations to provide more information on executive stock option grant policies, but stop short of barring or endorsing any particular practice as the agency continues its investigations of the granting practices of more than 60 companies.
The original proposal contained a provision known as the Katie Couric clause, which would have forced companies to disclose pay of some top non-executive talent. The approved rules exclude professional athletes, salespeople and entertainment figures.
Companies will now have to report a single number for executive pay and explain pay programs in narrative form on a new statement, "Compensation Discussion and Analysis." A nnual filings will also have to display the total yearly compensation for a company's chief executive officers, chief financial officers and its next three highest-paid executives. All of the disclosures will have to be written in plain English.
Among the range of newly required stock-option grant information, will be recorded grant date; fair value of the options on the grant date; closing market price of the shares on the grant date if higher than the strike price; and the date company directors awarded the options if that date differs from the recorded grant date.
The new rules are the largest overhaul of benefit disclosure policy since 1992, and are expected to go into effect next year.
Separately, in testimony earlier this week, SEC Chairman Christopher Cox told the Senate Banking Committee that he would ask the commission to adopt measures to regain some of the authority it lost a month ago, when a federal appeals court ruled that the SEC could not require hedge funds to register.
Cox also said that he would recommend to the SEC that it change the current rules on who can invest in hedge funds, increasing the net-worth threshold for an individual or couple to $1.5 million or more from $1 million today.
Previously on WebCPA:
SEC to PCAOB: Brake Guidance on Options (July 10, 2006)
SEC Members Open to Pay Disclosure Amendments (June 2, 2006)
Exec Pay Disclosure Fares Well in Poll (April 10, 2006)
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