Last week SEC Chairman Christopher Cox, in a speech before the Council of Institutional Investors, commented on the new executive pay disclosure requirements issued by the SEC at the end of January. (See previous post here.) Here is an excerpt from his speech pertaining to the proposed disclosure rules for perks and retirement benefits:
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.That sets the bar too high. $50,000 is what many of a company’s shareholders make all year, and it’s far above the median household income of $44,400. So under our proposal, perquisites must be itemized if they total $10,000 or more.
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.
This should ensure that retirement benefits, which under the current disclosure regime can be nearly impossible to understand, will finally become intelligible. We don’t want any more “Aha! moments” when shareholders learn the details of a “Golden Goodbye” only when an executive leaves the company — and it’s too late.
An important part of our job at the SEC is to ensure that investors have available to them all of the compensation information they need, presented in a clear and understandable form that they can use.
(Hat tip: CorporateCounsel.net Blog)