WASHINGTON -- Companies would have to disclose far more details about their executives' pay packages and perks under a proposal coming before the Securities and Exchange Commission.
The changes address a source of shareholder and public anger: lavish pay for executives, often not fully and clearly disclosed to investors, even as their companies stumble and lay off employees.
The five SEC commissioners are scheduled to vote at a public meeting next Tuesday on the plan, which makes the biggest changes in rules governing disclosure of executive compensation since 1992.
The proposal would be opened to a public comment period and could be formally adopted by the SEC sometime afterward -- possibly in time for the spring company proxy season next year.
Companies would for the first time be required to furnish tables in annual filings showing the total yearly compensation for the chairman and the next four highest-paid executives. The true costs to the bottom line of their pay packages, including stock options, would have to be spelled out.
''It has been a very long time since the [SEC] has revised these rules," agency chairman Christopher Cox said yesterday.
The tighter rules are needed ''in order to eliminate the surprise of hidden payments" to executives and to ensure that shareholders are fully informed, Cox said.
Cox, a longtime Republican congressman from California who became SEC chairman in August, said he had focused on the issue of compensation disclosure as a high priority before he was confirmed by the Senate.
Still, some critics of corporate conduct don't believe fuller disclosure of compensation goes far enough because it won't rein in runaway pay and may even create competitive pressure among companies that will push it up.
''Disclosure can produce resentment and demands for controlling the pay," said Tamar Frankel, a law professor at Boston University who specializes in corporate governance. ''Or it can continue to produce followers of a culture for squeezing more and looking for soft benefits that cannot be quantified."
Details of the SEC proposal to disclose far more details about executives' pay packages are still being worked out. But they include:
Reducing from $50,000 to $10,000 the level at which executive perks must be detailed if they add up to the latter amount or more.
Requiring new disclosure tables for executives' retirement benefits and the compensation of company directors.
Requiring companies to explain the objectives behind their executives' compensation.
SOURCE: Associated Press