SEC Votes on New Exec Comp Disclosure Proposals

July 1, 2009 ( - The Securities and Exchange Commission voted on Wednesday to propose sweeping new disclosure rules about a company's leadership and compensation practices.

According to the Wall Street Journal, the proposed rules, approved for consideration in a 5-0 vote, would require public companies to include information in proxy and information statements about an array of things, such as the relationship of a company’s overall compensation policies to risk and the background and qualifications of directors, executive officers and nominees (see SEC Pondering Comp Disclosure Expansion ).

Other areas that would require enhanced disclosure include potential conflicts of interest posed by compensation consultants and the company’s leadership structure, the news report said.

The SEC also proposed the analysis and discussion about company compensation policies for employees would not just apply to higher ranking officers, but would be expanded to include non-executive officers as well. The discussion would not delve into disclosing the specific salaries for lower-ranking employees. Presently, companies must disclose in proxy statements a narrative discussion that gives an overview of their compensation program for five top company officers, including the chief executive officer.

The SEC is also seeking to improve the reporting of stock and option awards. Currently those awards are disclosed based on the value recognized for financial statement reporting. But, under the proposal, they would be reported based on the fair value of the awards on the date they are granted.