SEC takes a close look at compensation packages
Hiding the money could get harder.
An SEC commission voted Tuesday to force congloms to more fully disclose exec compensation packages, a move the group hopes will cut down on lucrative deals hidden in the nether corners of balance sheets.
Reacting to ire that led to an investor lawsuit against Disney, the board proposed a slew of changes aimed at making it harder to disguise payments as stock options, perks and other benefits.
If the rules pass, companies would be required to include tables in their annual reports listing the compensation of the top five execs as well as a single figure tabulating the cost to the whole company.
The SEC will vote on the proposals after a public-comment period of 60 days.
The changes would also tighten laws against “related-party transactions,” essentially a loophole that allows relatives of execs to receive benefits.
But the proposal most likely to ruffle feathers — and cause a frenzy of interpretation — is a provision that companies be “required to explain the objectives behind their executives’ compensation.”
In a requirement not meant as comedy, the board also recommended that “Companies’ annual filings would have to include sections written in plain English on executive pay.”
The changes, which would be the first since 1992, are the project of the commission’s new chairman, Christopher Cox. Commissioner Cynthia Glassman referred to the proposals as information “shareholders have a right to know.”
In 2004, investors took the Mouse to court over a $140 million comp package to former exec Michael Ovitz. Disney won the suit.
The entertainment biz has long been a leader, such as it is, in the category of lavish exec benefits. In 2004 Viacom caused a stir when it was revealed that Sumner Redstone, Tom Freston and Leslie Moonves each took home packages exceeding $50 million, including stock options, and News Corp.’s Peter Chernin earned nearly $20 million.
Move may spur reform on the part of execs who don’t want to appear greedy, but observers have pointed out that information about competitors’ pay could give some even bigger eyes.