From the SEC’s press release here:
The Securities and Exchange Commission today voted to publish for comment proposed rules that would amend disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors. The proposed rules would affect disclosure in proxy statements, annual reports and registration statements. The proposals would require most of this disclosure to be provided in plain English. The proposals also would modify the current reporting requirements of Form 8-K regarding compensation arrangements.
Under the proposal, executive compensation disclosure would be organized into three broad categories: (1) compensation over the last three years; (2) holdings of outstanding equity-related interests received as compensation that are the source of future gains; and (3) retirement plans and other post-employment payments and benefits.
Highlights of the proposal:
- A reorganized Summary Compensation Table would be the principal vehicle for showing three-year compensation. The Table would include additional information, such as a new column reporting total compensation, a dollar value showing all stock-based awards, including stock and stock options measured at grant date fair value, and an “All Other Compensation” column showing “the aggregate increase in actuarial value of pension plans accrued during the year and all earnings on deferred compensation that is not tax-qualified.”
- The threshold for disclosing perquisites would be reduced to $10,000 and interpretive guidance is provided for determining what is a perquisite. Two supplemental tables would report Grants of Performance-Based Awards and Grants of All Other Equity Awards.
- Regarding the retirement plan disclosures, the press release indicates that “retirement plan and post-employment disclosure” would be required to include (1) a “Retirement Plan Potential Annual Payments and Benefits Table” which would disclose annual benefits payable to each named executive officer; (2) a “Nonqualified Defined Contribution and Other Deferred Compensation Plans Table” which would disclose year-end balance, and executive contributions, company contributions, earnings and withdrawals for the year; and (3) “disclosure of payments and benefits (including perquisites) payable on termination or change in control, including quantification of these potential payments and benefits.”
Also, here are some excerpts from Chairman Cox’s comments in his Opening Statement yesterday:
(1) “. . . Our purpose here today is to help investors keep an eye on how much of their money is being paid to the top executives who work for them. Today’s open meeting marks the first time in 14 years that the Commission has undertaken significant revisions of its rules for executive compensation. Simply put, our rules are out of date. It’s high time we updated the rules on executive compensation. To that end, the staff of the Division of Corporation Finance is recommending proposed changes to the current regime of executive and director compensation disclosure to do just that. . . “
(2) “. . . We want investors to have better information, including one number-a single bottom line figure-for total annual compensation. That single figure will include a more accurate representation of perquisites. Currently, companies are required to report a lump sum if an executive’s perks are more than $50,000, or 10 % of his or her salary and bonus. And under current rules, an individual perk has to be reported only if it represents more than 25% of all the perks that an executive receives. Under the proposal, perquisites must be itemized if they total $10,000 or more.. . ”
(3) “. . . The proposed new rules would also improve the disclosure of retirement benefits. New tables would outline the defined-benefit and defined-contribution retirement plans of top officers. There would also be detailed descriptions of payments that could be made if an executive is terminated. Those disclosures aren’t required under our current rules.. . “
Broc Romanek at CorporateCounsel.net Blog has comments regarding the proposals. Also, Michelle Leder at Footnoted.org attended the open meeting and has a Fact Sheet summarizing the proposals which is posted here.