SEC Chairman Comments on Executive Compensation
Earlier this month, SEC Chairman Mary Schapiro announced continued focus of the agency on the issues surrounding executive compensation. "The SEC is actively considering a package of new proxy disclosure rules that will provide further sunshine on compensation decisions," said Schapiro. "While these proposals would not dictate particular compensation decisions, they would lead companies to analyze how compensation impacts risk taking and the implications for long term corporate health of the behavior they are incenting," she continued.
Broadly, the Chairman described several areas where increased focus and disclosure could be mandated. These areas include:
- How a company manages risks.
- A company's overall approach to compensation matching the reward to the risk in terms of magnitude and length of impact on the company.
- The independence of compensation consultants and potential conflicts between compensation consultants and the company and their affiliates, so that compensation committees may better assess the advice they receive.
- The independence and expertise of director nominees and an explanation regarding the board structure.
Just a few weeks prior to these comments, the SEC sought public comments regarding proposals to make it easier for shareholders to put their own nominees on the proxy materials mailed out to shareholders. Current rules make that process difficult and expensive for shareholders.
More disclosure is on the horizon. Many of the so-called "TARP rules" are beginning to be adopted by non-TARP companies in an effort to get "ahead of the curve" with their own shareholders. Clearly the landscape of compensation is experiencing significant changes.
