Companies Shy Away from Disclosing Executive Pay Goals

March 28, 2007 ( - A new analysis of 2007 proxy statements from 100 large publicly-traded companies found nearly half chose not to disclose specific goals on which executive pay plans are based.

In a press release, Watson Wyatt Worldwide said 46% of companies in its analysis did not disclose the actual goals on which they based rewards under their 2006 annual incentive plans, and 45% did not include the goals on which long-term incentive plans were based. New disclosure rules adopted by the Securities and Exchange Commission (SEC) last July requested information on goals be provided unless doing so would result in competitive harm (See SEC Approves Updated Executive Comp Disclosure Rules ).

Meanwhile, according to the press release, many more companies did disclose the underlying financial metrics used to set executive compensation, such as earnings per share or net operating income, but without a specific dollar figure attached to it.  Eighty-five percent of firms analyzed disclosed the metrics on which annual awards are based, and 73% disclosed metrics used for setting long-term incentives.

Reflecting the pressure investors and the new disclosure rules place on companies to demonstrate how executive pay is tied to performance, the analysis also found two in five companies (40%) changed their incentive compensation programs last year or plan to do so this year in the wake of the new rules.  On the other hand, only 19% of firms made changes to their change-in-control policies.

Additionally, only 13% made changes to supplemental executive retirement programs and 10% made changes to perquisite policies.